Following the US President Donald Trump’s imposition of 25% tariffs on Canada and Mexico and a 10% levy on China on Saturday, aiming to address illegal immigration and drug trafficking issues, the first two nations vowed to implement retaliatory measures, while China announced plans to challenge the tariffs at the World Trade Organization and consider additional countermeasures.
The move triggered volatility in the commodities market, prompting reactions from leading financial institutions:
Goldman Sachs: The firm anticipates that Canadian oil producers will bear the majority of the tariff burden, resulting in a $3 to $4 per barrel discount on Canadian crude due to limited alternative markets. U.S. consumers might face an additional $2 to $3 per barrel impact. Moreover, the 10% import tariffs could slightly reduce Canadian natural gas exports to the U.S. by 0.16 billion cubic feet per day, with minimal effect on U.S. gas prices.
Barclays: The bank suggests that the additional costs will likely be shared equally across the supply chain, including Canadian producers, Midwest refiners, and end-consumers. Barclays notes that tariffs generally weigh down oil demand and strengthen the U.S. dollar, leading them to prefer a narrower Brent-WTI spread.
Citi: The bank foresees further tariff escalations benefiting gold and silver, projecting gold to rise to $3,000 per ounce and silver to $36 per ounce within six to twelve months. On the other hand, copper prices could drop to $8,500 per ton over the next three months, based on prices outside the U.S.
JP Morgan: Maintaining a bearish outlook on base metals, the firm sees copper prices potentially falling toward $8,500 per metric ton and aluminum declining to $2,400 per metric ton as market risks are priced in amid heightened economic and inflationary concerns over tariffs. For precious metals like silver, platinum, and palladium, industrial sentiment and auto sector risks could widen the gap with gold, with JP Morgan favoring gold for now.
RBC Capital Markets: The firm indicates that tariffs are unlikely to reduce U.S. gas prices and may contribute to slightly higher prices while they remain in effect. Furthermore, any extension of tariffs could make gold more expensive in the U.S. compared to what they would otherwise be.
