U.S. West Texas Intermediate crude oil futures are trading only slightly lower for the week despite a steep sell-off on Thursday. After edging higher $3.97 over nine trading sessions, these gains were wiped out in just one day as prices plunged to their lowest level since June 18. The catalyst for the plunge in prices was the announcement of additional tariffs on China by the United States. The news came as a surprise since the two economic powerhouses had just ended its first round of renewed trade negotiations after earlier talks broke off in early May.
New Tariffs Raise Concerns about Demand
Crude oil plunged on Thursday after President Donald Trump said he would impose an additional 10% tariff on Chinese imports to the U.S.
Trump said in a series of tweets the tariff will be imposed on $300 billion worth of Chinese goods. The levy will take effect September 1. He added later in the day those levies could go up to 25%. Trump’s comments came after a U.S. delegation met with Chinese trade officials earlier this week.
This news should have an impact on demand. Furthermore, the market could take another hit if there are countermeasures from China.
Weak U.S. Factory Output
In other news pointing to lower demand, U.S. manufacturing activity slipped last month, dropping to a near three-year low, and construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years.