The escalating tension between China and the United States has taken a toll on the global oil market, sending prices downward as worries over the result of the Sino-American row shocks market.
The Chinese government has said – for the first time – that it will start imposing tariffs on American goods and products, which send the prices down nearly 4% to two-week lows as the tension between the two political and economic superpower sends the fear of a slowdown in the global oil demand.
Beijing said that one of the products tariffs would be imposed on is American crude, which they will levy a 5% tariff, effective September 1st. Washington responded through a series of Tweet posted by President Donald Trump that he will increase the tariff on $250 billion Chinese imports from 25% to 30%. He said that this new tariff rate would be implemented starting October 1st. Similarly, Trump also said that the remaining $300 billion imports from China would see another 5% increase in tariff from 10% to 15%, effective starting September 1st.
China, one of the world’s biggest crude importers, has sharply lowered U.S. shipments from a record high hit last year. However, according to analysts, with the tariffs in place, purchases are more likely to be placed in a temporary halt.
“The tit-for-tat trade war now has the oil market officially caught in the crossfire, this time with China striking the heart of Trump’s traditional base of support of U.S. oil producers,” said Michael Tran, director of energy strategy at RBC Capital Markets in New York.
“With China being the world’s foremost crude import growth region, U.S. producers need China, not the other way around,” he said. “The U.S. will have to find alternative buyers for their crude, which will be a challenge given the weakening global demand backdrop.”
