Oil Market Awaits China Decision to Increase Tariffs on US Crude

Oil markets are bracing for a reshuffle of global trade flows as China threatens to impose tit-for-tat tariffs on imports of U.S. energy products, including crude.

China, which has bought an average 330,000 barrels per day (bpd) of U.S. crude oil this year, is threatening to place a 25 percent tariff on various U.S. commodity exports, including crude oil, although it is so far unclear when such a measure would come in place.


West Texas Intermediate graph

The decision came in response to U.S. President Donald Trump saying he was pushing ahead with hefty tariffs on $50 billion of Chinese imports.

And it triggered an aggressive response by Trump, who on Monday threatened to slap a 10 percent tariff on $200 billion of Chinese goods in addition to the import duties previously announced.

The tariffs could restrict the flow of U.S. barrels going to China – a business now worth almost $1 billion per month

An import duty would make U.S. oil less competitive than other crudes, almost certainly resulting in a sharp fall of Chinese purchases, forcing U.S. oil firms to find other buyers.

In the first three months of this year, U.S. crude made up around 5 percent of China’s total crude imports, according to Chinese customs data.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza