China’s latest round of tariffs in response to U.S. tariffs on US$16 billion worth of Chinese goods entered into force today despite talks this week between U.S. and Chinese officials seeking to put an end to the trade dispute. The list of U.S. products this time includes oil products and coal for the first time, S&P Global Platts reports.
Chinese importers have already started reducing their purchases of U.S. oil products: in May, oil product exports to China hit a 10-month low at 141,000 bpd, with LPG exports in particular dropping to 52,000 bpd—the lowest in 11 months. To compare, the average U.S. oil product export rate was 229,000 bpd in 2017 and 181,000 bpd a year earlier.
This is the second stage in the escalating dispute, which started when President Trump decided to deal with the trade deficit that the United States has with China using radical measures. The first round of tariffs covered Chinese products worth US$34 billion. China responded in kind. This is the second round of tariffs, to be followed, according to the White House, by tariffs on US$200 billion worth of Chinese goods.
There is concern that if the tariff exchange continues, China will sooner or later include U.S. crude oil imports in the list of products to be sold more expensively in the world’s second-largest economy. Yet it might decide to wait: an Al Jazeera commentator in China notes that the country is going through economically difficult times as growth slows and consumer confidence shows signs of wavering as the yuan declines.
Yet Beijing is not backing down despite insistence from Washington that it put the breaks on a technology development strategy that, according to the U.S., features unfair trade practices. China has threatened that if the U.S. goes ahead with the next round of tariffs, it will respond with tariffs on US$60 billion worth of U.S. goods, which will be the first disproportionate response in the exchange. The gap is a result of China’s trade surplus with the United States.
By Irina Slav for Oilprice.com
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