Onome Amuge
Global crude oil prices fell sharply on Tuesday amid growing trade tensions as the United States imposed tariffs on Chinese goods, prompting China to retaliate with its own countermeasures, leading to heightened concerns over a potential escalation of the ongoing trade war.
Meanwhile, U.S. President Donald Trump also announced a one-month reprieve on steep levies on imports from Canada and Mexico, temporarily easing fears of further economic disruptions arising from trade conflicts.
Global crude prices slumped on Tuesday, with the U.S. benchmark West Texas Intermediate (WTI) crude oil falling by $2.03, or 2.77 percent, to $71.13 a barrel, while Brent crude, the international benchmark, declined by $1.41, or 1.86%, to $74.55 a barrel.
As the U.S. and China step up their trade war, China’s Finance Ministry announced retaliatory tariffs on a range of U.S. goods, including 15 percent tariffs on U.S. coal, LNG, and crude oil, and 10 percent levies on farm equipment, trucks, and large sedans.
The ongoing tensions between the world’s two largest economies threaten to dampen demand for oil, which could lead to sustained pressure on prices as investors grow increasingly concerned about the potential impact of the trade war on the global economy and energy markets.
Kelvin Wong, senior market analyst at OANDA, noted that Beijing’s measures might not be limited to the 10 percent tariffs on U.S. crude oil imports.Â
According to Wong, China could attempt to weaken the yuan if the U.S. strikes back with additional tariffs, thereby strengthening the U.S. dollar and potentially putting downward pressure on oil prices.
Despite accounting for only 1.7 percent of China’s total crude oil imports in 2024, the U.S.’s presence as a crude supplier is considered significant enough to elicit a retaliatory response from Beijing in the ongoing trade war.
Yeap Jun Rong, market strategist at IG, pointed out that China’s counter-tariffs might signal an escalation of trade tensions, potentially reducing the odds of a temporary solution similar to the agreements reached with Mexico and Canada.
Meanwhile, OPEC+, the influential alliance of oil producers, announced on Monday that it would maintain its current strategy of a slow increase in oil production from April onward.
