U.S. crude oil is unlikely to become a target of possible Chinese retaliatory tariffs in response to the latest American tariff threat, refinery and trading sources told S&P Global Platts after U.S. President Donald Trump announced 10-percent tariffs on the remaining US$300-billion U.S. imports of Chinese goods.
Chinese refiners have not bought much U.S. crude oil over the past year, because of the U.S.-China trade spat and related uncertainties over which goods could be subject to tariffs next. So far, oil has been spared from the tariffs, yet Chinese oil traders and refiners have been shunning U.S. crude and they no longer want to sign long-term supply agreements with U.S. producers.
So, American crude oil is currently not an essential trade item between the United States and China, refinery and trade sources in China have told S&P Global Platts.
China, for its part, will likely be aiming at goods that could hurt more U.S. exporters and create maximum impact for U.S. exports in possible retaliatory tariffs, the sources say.
On Thursday last week, oil prices took a heavy hit after U.S. President Donald Trump said that the U.S.-China trade talks—after no-breakthrough negotiations—would continue in September, while the “U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country.”
China pledged that it would impose new “necessary countermeasures” to protect its interests after the latest tariff threat, saying that President Trump’s tariff announcement was “an irrational, irresponsible act,” according to Zhang Jun, the new Chinese ambassador to the United Nations, as carried by Reuters.
On Monday, China let its currency, the yuan, drop to a decade-low and reportedly told its state companies to suspend imports of agricultural products from the United States in response to last week’s tariff threat.
By Tsvetana Paraskova for Oilprice.com
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Still, Chinese refineries have been shunning US crude oil imports and LNG. Moreover, they are no longer signing long-term supply agreements with US producers.
China described President Trump’s latest tariffs as irrational and irresponsible act. It
retaliated by letting the yuan drop to a decade-low and reportedly told its state companies to suspend imports of agricultural products from the United States in response to last week’s tariff threat.
Almost two years ago President Trump started a trade war against China, lost it and now he doesn’t know how to end it without losing face. And losing face he will because he has no alternative but to end it on China’s terms otherwise it could affect his chances in the next presidential elections in 2020.
What is making it difficult to end the trade war is that the Chinese leadership has low respect for the shallow intellect of President Trump and his word. Because of that, President Trump seems to be influenced by the last man he listens to. Furthermore, he agrees one thing today and reneges on it the following day. That is exactly what happened after his meeting with the Chinese leader Xi Jinping in June during the G-20 summit in Osaka, Japan. No sooner they agreed to resume the trade talks President Trump announced a new set of sanctions against China.
Still, President Trump is well advised to cut his losses and end the trade war because it is hurting US economy far more than China’s as his former chief financial adviser admitted a few days ago.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London