Trump’s threat of ‘secondary tariffs’ invents new trade tool

President Donald Trump appeared to invent a new economic statecraft tactic this week by threatening what he dubbed “secondary tariffs” on countries that buy oil from Venezuela to choke off its oil trade with other nations.

The threat, delivered via Truth Social post then confirmed in an executive order, said countries could face 25% tariffs on trade with the US if they purchase oil and gas from Venezuela, which is already under heavy US sanctions. The move was meant to pressure Venezuela for the “tens of thousands of high level, and other, criminals” that Trump said Venezuela has sent to the US.

The novel approach adds to a growing list of tools that Trump has been eager to deploy as part of a push to use America’s economic clout as leverage in achieving its foreign and domestic policy goals. The idea seems certain to increase tensions with the Latin American nation over immigration and foreign policy.

“This is a new concept in economic warfare,” said Francisco Monaldi, a director of the Latin American energy policy at Rice University’s Baker Institute for Public Policy in Houston. “How is it enforceable? It’s unclear of course.”

With the threat, Trump appeared to be inventing a combination of tariffs and what are known as secondary sanctions, the financial punishments that can be imposed on other countries or people for doing business with sanctioned entities. The targets of his “secondary tariffs” could vary widely given that Venezuelan oil goes to the US, Spain, India and the black market.

The first three countries are covered by licenses to Chevron., Repsol SA and Reliance Industries Ltd. The black market is dominated by China.

“China is the main actor this is directed at because it’s essentially the black market for Venezuelan oil,” Monaldi said. “They would not have to do secondary tariffs if it wasn’t for China.”

Trump’s executive order gives Secretary of State Marco Rubio discretion to decide, starting April 2, whether the 25% tariffs will be imposed on a country that imports Venezuelan oil, either directly or indirectly.

While the order doesn’t state exactly who would be targeted with a secondary tariff, it does specify that if China were to have such a tariff imposed it would apply not just to the mainland but to Hong Kong and Macau as well. Other than Venezuela, China was the only country named in the order.

Beijing opposed the move. The US has “long abused illegal unilateral sanctions and so-called long-arm jurisdiction to grossly interfere in the internal affairs of other countries,” Guo Jiakun, a spokesman for the Chinese Foreign Ministry, said at a regular briefing in Beijing Tuesday.

BLOOMBERG