U.S. President Donald Trump has imposed sweeping tariffs on Canada, Mexico and China, triggering volatility in the commodity and energy markets. The move includes a 25% tariff on Canadian and Mexican exports and a 10% levy on Chinese imports, aimed at addressing illegal immigration and drug trade concerns. In response, the affected nations have vowed to retaliate, while China has signaled plans to challenge the measures at the World Trade Organization.

Impact on Oil and Gas Markets

Goldman Sachs predicted that Canadian oil producers will bear most of the cost, leading to a $3-$4 per barrel widening of the Canadian crude discount due to limited alternative export routes. U.S. refiners and consumers will also see increased costs, adding another $2-$3 per barrel burden. Meanwhile, Barclays noted that refineries in the U.S. Midwest, which process Canadian crude, will share the incremental costs with producers and end consumers.

Unlike crude oil, the impact on natural gas exports is expected to be more muted. Goldman Sachs forecasted a modest decline of 0.16 billion cubic feet per day in Canadian natural gas exports to the United States due to the 10% tariffs.

Understanding the Tariffs and Their Implications

Trump’s tariffs, primarily targeting steel, aluminum, and Chinese goods, could significantly affect the energy market, both directly and indirectly. One major concern is the impact on U.S. refiners, many of who depend on imported crude oil, particularly heavier grades from Canada and Mexico. If tariffs result in retaliatory trade barriers or higher import costs, refining margins could come under pressure, making operations less profitable.

Additionally, the energy sector is a major consumer of steel and aluminum, materials essential for constructing pipelines, drilling rigs and refining units. Higher costs for these raw materials due to tariffs could slow down infrastructure projects and reduce overall profitability, potentially delaying critical developments in the industry.

However, there could also be potential benefits for U.S. oil producers. Tariffs on foreign oil imports may make domestically produced crude more attractive, causing refiners to seek alternatives within the country. This shift could particularly benefit shale producers, whose low-cost operations might see increased demand as refiners adjust to the changing trade landscape.

U.S. Energy Stocks Likely to Benefit

Despite the near-term volatility, we have identified three U.S. energy companies that stand to gain significantly in the evolving tariff landscape. These are EOG Resources (EOG), Cheniere Energy (LNG) and Exxon Mobil Corporation (XOM). While EOG Resources carries a Zacks Rank #2 (Buy) at present, Cheniere Energy and ExxonMobil have a Zacks Rank #3 (Hold) each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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EOG is a major E&P player with a focus on high-efficiency production, especially in the Permian and other shale basins. With its strong operational scale and high-return assets, EOG is likely to benefit from higher demand for domestic crude.

EOG currently has a market capitalization of around $71.1 billion, with its shares soaring 14.5% over the past year.

Cheniere Energy, a leading U.S. LNG exporter, could see increased demand for American liquefied natural gas as tariffs disrupt traditional gas flows. With Canadian exports to the United States facing headwinds, domestic gas prices may rise, further incentivizing Cheniere’s export operations to meet global LNGdemand.

LNG currently has a market capitalization of around $51.5 billion, with its shares having climbed 42.4% over the past year.

As a leading integrated energy giant, ExxonMobil is well-positioned to benefit from constrained Canadian crude imports. U.S. refiners relying on domestic crude may find Exxon’s upstream operations in the Permian Basin particularly valuable. Additionally, the company’s diversified global portfolio shields it against region-specific disruptions.

XOM has a current market capitalization of approximately $470.7 billion. Its shares have risen 7.5% over the past year.

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