The US oil and gas industry has never been immune to trade policy decisions, but it is currently facing a tough test with the imposition of new tariffs on steel imports.

US President Donald Trump announced a 25% tariff on steel imports, the decision included the cancellation of exemptions that mitigated the impact of previous steel tariffs, in addition to increasing the tariff on aluminum imports from 10% to 25%, and this step aims to “correct long-standing trade imbalances.”

Although Washington raises the banner of “trade fairness,” major sectors, led by the US oil and gas industry, find themselves facing a new challenge that threatens to raise costs.

A recent report, reviewed by the Energy Research Unit, believes that the new steel tariff will add pressure on the sector, expecting well costs to rise.

Domestic factories meet 74% of the United States’ steel needs, but many industries, such as automotive, construction, and energy, still need to import certain types of steel, such as steel pipes and valves that can withstand extreme temperatures and pressures.

The US oil and gas industry is under the pressure of tariffs
Despite the Trump administration imposing a 25% tariff on steel imports in 2018, the US oil and gas industry has not been affected because some countries’ exports of oil pipes and valves—steel pipes and valves used in drilling—were exempt from the tariffs.

But recent statements by President Trump suggest that it will be difficult to grant exemptions again from these tariffs, which will take effect on March 12.

According to a report by energy research firm Wood Mackenzie, the United States imports about 40-50% of its drilling pipes, so expect prices to rise amid the tightening of tariffs and the reduction of exemptions.

Given that these pipelines represent about 8.5% of the cost of drilling and preparing onshore wells in the United States, a 25% price increase due to the tariffs will add 2.1% to well costs, according to the Energy Research Unit.

Before the announcement of these tariffs, Wood Mackenzie expected costs to stabilize in 2025, compared to their levels in the last quarter of last year.

Will oil and gas production be affected?
According to the Wood Mackenzie report, the impact of tariffs on the costs of oil pipelines of all types will be limited, compared to the increases witnessed after the Corona pandemic, as prices almost doubled between late 2020 and early 2023.

However, they are expected to increase the financial burden on the American oil and gas industry, at a time when companies were looking to increase their production cautiously.

With these pressures escalating, the American Petroleum Institute confirmed that Trump’s policy aimed at boosting oil and gas production requires exemptions from tariffs on oil pipelines of all types.

On the other hand, the impact of the new tariffs may not be limited to the US oil and gas industry alone, but may extend to include energy prices in all its forms, whether traditional or renewable.

The structures used to support solar panels and wind turbine towers rely on steel and aluminum, which makes them vulnerable to price increases, in addition to the cost of power transmission lines, according to a report published by the New York Times.

How will other industries be affected?

Tariffs on steel imports may contribute to increasing prices, which benefits domestic producers and enhances the chances of increasing jobs in the sector, which currently includes about 140,000 jobs, according to what was monitored by the Energy Research Unit.

This increase in prices was evident when President Trump imposed tariffs on steel and aluminum in 2018, as prices of the two metals rose by about 2%, and imports fell by about a quarter.

Despite these gains, it will come at the cost of significant losses in industries that rely on the two metals, such as construction, automotive, packaging, appliances, oil and electricity, where steel and aluminum prices are a major part of production costs. For example, it takes about half a ton of steel to make a single car, meaning a 25% tariff could increase production costs per vehicle by more than $1,000.