SAUD K ALRASHED WRITES — The US and China have not always been the best of allies, but they have benefitted from their trade relationship. That could change, and soon. While one of America’s major exports to China is crude oil, the China-US tariff war is heating up thanks to the September 29th, 25% duty tax slapped on American oil in response to recently imposed US restrictions.

The US Oil Export to China has been on the rise. The Impact of the Tariffs is likely to seal the reduction of the oil trade between the two countries (Figures in thousands of Barrels)

This rising oil conflict is a significant marker in the trade war, which could also hurt relations with other countries. China is now the biggest Asian market for American drillers. so Chinese tariffs could undermine President Trump’s goal of reducing the trade deficit.

That’s why now the United States has urged nations to buy oil products from America instead of Iran. But with the tariffs, Chinese refiners would prefer buying from Iran. The all too possible end result? The US would lose a lot of business and the China/US relationship would further deteriorate.

US drillers face two possible outcomes: First, reduce the price of oil in order to attract Chinese refineries. Second, sell their oil to other markets, at huge discounts. For drillers, both are no-win propositions. And while President Trump might appreciate the resulting lower price of gasoline at home, making him politically strong on the domestic front, these same reduced prices won’t lower the trade deficit with China because the economy is mainly based on the oil industry.

There are no winners here. Now is the time to de-escalate this trade war. China and America should cool down, sober up and stop retaliating against each other.

 

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