How Trump’s ‘liberation day’ tariffs have shaken up global energy markets

Donald Trump has branded April 2 “liberation day” – a turning point in US trade policy that marks a sharp departure from decades of global economic orthodoxy. In a sweeping escalation, the President on Wednesday announced a 10 per cent universal tariff on nearly all US imports , coming into force on April 5, alongside “ reciprocal” duties targeting key trading partners. Chinese goods now face total tariffs of 54 per cent, Vietnamese imports 46 per cent, Japanese goods 24 per cent and European products 20 per cent. Mr Trump has framed the move as a way to rebuild domestic manufacturing and fund future tax cuts – warning that the era of “unilateral economic surrender” was over. The response was immediate. US stock futures dropped, gold prices surged and major trading partners including the EU, China and Taiwan promised retaliatory measures. Economists warned the tariffs could exacerbate inflation and weigh heavily on consumers . Meanwhile, business leaders are braced for higher input costs and greater uncertainty, particularly in sectors already strained by supply chain fragility, such as automotive and pharmaceuticals among others. This tariff package comes only days after Mr Trump activated “secondary tariffs” on countries purchasing oil and gas from Venezuela, which became effective on April 2. He has also threatened similar measures against buyers of Russian energy unless a ceasefire is reached in Ukraine, and comparable threats against buyers of Iranian oil. What’s changed is not the connection between energy and trade, but the extent to which Mr Trump is wielding both in tandem as instruments of foreign and domestic policy. For global businesses, the fallout is immediate : energy prices are volatile, supply chains are under pressure and trade routes are being redrawn. Sudden policy shifts from Washington are forcing companies to rethink procurement, pricing and investment decisions in real time. Framed publicly as a push for US “ energy dominance ”, Mr Trump’s approach is more tactical than ideological. The goal is to drive oil prices lower – and fast – to contain inflation and deliver on his campaign promise to halve energy and electricity costs within 18 months. US inflation rose to 2.8 per cent in February. Last month, Mr Trump’s trade adviser Peter Navarro called $50 per barrel of oil a key target to fight inflation. At the time of writing, US oil is trading closer to $69. But this is where Mr Trump runs into a structural contradiction. According to a survey by the Federal Reserve Bank of Dallas, US shale oil executives have warned the administration’s trade war is thwarting their investment in new drilling. One said: “The threat of $50 oil prices by the administration has caused our firm to reduce its 2025 and 2026 capital expenditures.” Another warned: “‘Drill, baby, drill’ does not work with $50-per-barrel oil.” Shale wells deplete quickly, requiring constant reinvestment just to maintain production. Without stable pricing, capital dries up. That means less supply, not more. Compounding the pressure on producers is the impact of Mr Trump’s steel tariffs. The metal is critical to drilling operations and pipeline infrastructure, and the 25 per cent levy on imported steel has raised costs across the oil and gas sector. According to the Dallas Fed survey, 55 per cent of oilfield service firm executives now anticipate a drop in demand due to these tariffs – a sign that protectionist measures may be curbing domestic energy activity rather than stimulating it. In short: lower prices undercut US production, while higher prices squeeze consumers. It’s a fundamental tension Mr Trump’s administration has yet to resolve. That imbalance is mirrored in Venezuela, which despite holding the world’s largest proven oil reserves, has registered a dramatic collapse in output over the past decade. Still, restricting Venezuelan exports could marginally tighten global supply, adding upwards pressure on prices and indirectly strengthening the case for more US production. More provocative still is Mr Trump’s suggestion that military action against Iran is on the table – a warning tied to stalled negotiations over Tehran’s nuclear programme. While the US administration’s stated goal is $50 oil, such a move would almost certainly send crude in the opposite direction, underscoring the disconnect between political rhetoric and market reality. Mr Trump’s comments about Russian President Vladimir Putin add another layer of complexity. Frustrated by stalled ceasefire talks over Ukraine, Mr Trump has warned that countries continuing to buy Russian oil or gas could face secondary tariffs of 25 per cent to 50 per cent. Major importers – including India and China – would be forced to seek alternative suppliers, most likely at higher cost. But once again, Mr Trump’s motivation appears to be driven more by economics than geopolitics. By threatening tariffs on buyers of Russian oil, the goal is to make competing supplies less attractive – clearing the way for more US exports. The bigger picture is a familiar one: shrink the trade deficit by boosting outbound shipments of American oil and gas, while sidelining rival producers from worldwide markets. For global businesses, the greatest risk in all this is uncertainty. In energy-intensive sectors – from aviation and shipping, to chemicals and heavy manufacturing – the lack of predictability makes it harder to plan, invest or hedge commodity prices effectively. Some companies are turning to scenario-modelling to manage the growing volatility – mapping out everything from sudden oil price surges to shifting trade barriers. But these tools are resource-intensive, requiring specialised expertise and high-quality data. For smaller firms, they remain costly and difficult to implement at scale. Meanwhile, US influence over global oil prices is limited. Though it is the world’s largest producer, US output is market-driven, not state-controlled. As a result, Washington can’t simply flood the market to lower prices. Only producers such as Saudi Arabia and the UAE hold the spare capacity to move prices meaningfully in the short term. A peace deal in Ukraine could, in theory, bring Russian energy back into western markets, but that would require major sanctions relief and a political reset with Moscow – both unlikely any time soon. Then, there is Mr Trump’s unpredictability. Last month alone, he imposed 25 per cent tariffs on imports from Mexico and Canada, only to partially reverse course within hours, offering temporary exemptions. Now, with a 10 per cent universal tariff and targeted duties against major economies, he has upended the global trade playbook. The result is a fragile, volatile environment for international business. The US faces a heightened risk of recession, with leading banks warning that protectionist policies could weigh heavily on growth. A sharp downturn in the US would likely trigger a broader global demand shock. Multinationals must now rethink supply chains, hedge more aggressively and prepare for sustained volatility in energy markets and trade rules. Political risk must be embedded into core decision-making – not treated as an externality. As Mr Trump’s “liberation day” evolves into something larger – a full reordering of global trade and energy flows – the message is clear: the rules-based system is being replaced by realpolitik. The old business playbook no longer applies. Karl Schmedders is professor of finance at IMD