However, American drillers stand to miss out on growing Chinese demand if the tariffs remained in place. Wood Mackenzie projects that U.S. crude exports to China could double through 2023 in a free trade environment, but the tariffs mean shipments could fall short of that forecast.
"While China could secure the crude from alternative sources such as West Africa, which has similar quality as the U.S. crude, U.S. would find it hard to find an alternative market that is as big as China," Wood Mackenzie said in a briefing on Monday.
Other American crude grades from Texas are trading at even steeper discounts to Brent than West Texas Intermediate, as drillers face a shortage of pipeline capacity to accommodate a boom in production from the Permian basin. But the tariffs would also whittle away that advantage, potentially leaving that oil stranded just as drillers work through the bottlenecks next year, according to Smith at ClipperData.
That leaves two likely outcomes for U.S. drillers, neither of which are good. U.S. prices would have to fall even lower relative to foreign crude to make it attractive to Chinese buyers, or American oil would have to sell at a discount in other markets.
"You would see other market players coming in being able to pick that crude up at bargain basement prices," Smith said.
That could include India, South Korea, Taiwan and Thailand, all of which are emerging as steady buyers.
Trump could benefit in one respect because lower oil prices would keep a lid on the cost of gasoline under his watch. But the Chinese tariffs would hurt the growing U.S. oil industry, a key part of his base, and undermine his goal of narrowing the trade deficit with China.