09:14 AM EST, 03/04/2025 (MT Newswires) -- Oil fell to a three-month low early on Tuesday as the United States launched a tariff war on its largest trading partners and OPEC+ affirmed it plans to begins returning 2.2 million barrels per day of production cuts to the market next month.

West Texas Intermediate crude oil for April delivery was last seen down US$0.96 to US$67.41 per barrel, the lowest since Dec.6, while May Brent crude was down US$1.10 to US$70.52.

The drop comes as U.S. President Donald Trump launched a trade war on the country's largest trading partners, imposing 25% tariffs on Canada and Mexico, while doubling tariffs on goods from China to 20%.

Canada is responding with an initial tranche of retaliatory tariffs on $30 billion of U.S. goods and plans to raise the levies to $155 billion of imports, while China imposed levies of 10% to 15% on U.S. food and agricultural products, while placing export and investment restrictions on 25 U.S. companies. Mexican President Claudia Sheinbaum is expected to announce her country's plans to retaliate later Tuesday.

The U.S. tariffs come as the country's economy is already significantly weakening, with the Federal Reserve Bank of Atlanta's GDPNow forecast on Monday modeling a 2.8% drop in the country's first-quarter gross domestic product, while the new levies are expected to boost inflation and further slow growth.

Adding to the market's bearish outlook, OPEC+ on Monday reaffirmed plans to begin returning 2.2-million barrels per day of production cuts in 18 monthly tranches beginning in April.

"We certainly thought there was a case to wait until 2H given the uncertainty over tariffs and sanctions. However, the OPEC leadership may have judged that the downside risk of going forward was comparatively limited, given the relatively small size of the increase and the fact that the Trump administration has been applying pressure on the producer group to increase production," Helima Croft, Head of Global Commodity Strategy and MENA Research at RBC Capital Markets, wrote.

Donald Trump's appeasement of Russia is also raising concerns the United States is ready to lower sanctions on the country, with Reuters reporting the White House is asking the Treasury and State departments for a list of sanctions on the country that could be eased as it suspended aid to Ukraine.

"The Oval Office bullying is not over yet. President Trump has announced a halt to military aid for Ukraine in a combination of petulance and a strong-arm tactic of bringing President Zelensky to heel. The oil fraternity smells a headlong deal with Russia as the White House ... has asked the state and treasury departments to draft a list of sanctions that could be eased for US officials to discuss with Russian representatives in the coming days," PVM Oil Associates noted.