U.S. crude prices fell nearly 2% amid rising trade tensions as China imposed retaliatory tariffs on American oil. Learn how these shifts impact global markets.

U.S. Crude Prices Drop as Trade Tensions Escalate with China


U.S. crude prices fell nearly 2% amid rising trade tensions as China imposed retaliatory tariffs on American oil. Learn how these shifts impact global markets.


U.S. Crude Prices Decline as China Imposes Retaliatory Tariffs

U.S. crude oil prices took a sharp hit on Tuesday, dropping nearly 2%, as newly imposed tariffs between the United States and China heightened economic uncertainty. While President Donald Trump opted to delay additional levies on Canada and Mexico, the U.S. still moved forward with a 10% tariff on Chinese imports, triggering immediate retaliatory measures from Beijing.
At the market’s latest reading, West Texas Intermediate (WTI) crude fell by $1.32, or 1.8%, settling at $71.84 per barrel, while Brent crude futures declined by 87 cents, or 1.2%, reaching $75.09 per barrel. The trade war’s renewed intensity has rattled investors and prompted concerns over global economic stability.

China Hits Back with Tariffs on U.S. Energy Imports

In direct response to U.S. tariffs, China imposed a 15% levy on American coal and liquefied natural gas (LNG) and a 10% tariff on crude oil imports, set to take effect on February 10. The move intensifies fears of prolonged economic strain, particularly within the energy sector.
Market analysts believe these measures could hinder trade negotiations and delay any potential resolution. IG market strategist Yeap Jun Rong stated, “China’s counter-tariffs signal escalation, reducing optimism for a quick settlement like the agreements reached with Mexico and Canada.”
With Beijing and Washington engaging in a tit-for-tat tariff strategy, oil traders are now pricing in the risk of slower global economic growth, which could further impact demand.

Impact on U.S. Oil Exports to China

Although China is a major oil importer, U.S. crude only accounts for about 1.7% of China’s total crude imports, according to customs data. Despite this relatively small share, the additional tariffs are expected to make American oil less competitive against alternatives like Kazakhstan’s CPC crude and Abu Dhabi’s Murban blend.
Energy analysts suggest that WTI crude flows to China will slow significantly as a result of the tariff increase. June Goh, a senior analyst at Sparta Commodities, emphasized, “A 10% tariff makes WTI crude too expensive for Chinese buyers, leading them to seek cheaper alternatives elsewhere.” However, she also noted that WTI crude can still be redirected to other markets, mitigating the broader impact.

Canada and Mexico Secure Temporary Tariff Relief

While tensions escalated with China, the United States opted for a different approach with its North American neighbors. Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum reached an agreement with the U.S. administration to strengthen border enforcement against illegal immigration and drug smuggling.
In exchange, the Trump administration postponed planned tariffs of 25% on various imports from Canada and Mexico for 30 days. A proposed 10% tariff on energy imports from Canada was also put on hold.
This temporary relief provides breathing room for energy traders and refiners, as Canada remains a key oil supplier to the U.S. market.

Oil Market Eyes U.S. Inventory Data for Further Signals

Aside from tariff developments, investors are also closely watching the upcoming release of weekly U.S. crude inventory data for the week ending January 31. Early estimates suggest crude stockpiles likely increased, while gasoline and distillate inventories may have declined.
These inventory trends, coupled with ongoing geopolitical tensions, could further shape oil price movements in the coming days. Should stockpile levels exceed expectations, additional downward pressure on oil prices may follow.

Trade War Adds Volatility to Energy Markets

The latest round of tariffs underscores the ongoing volatility in global energy markets. While the impact of China’s retaliatory measures on U.S. crude prices may be limited due to flexible global trade flows, the broader economic implications remain a concern.
As oil traders assess shifting supply chains and geopolitical risks, market participants will continue to monitor developments between the U.S. and its key trading partners. The coming weeks could prove critical in determining whether tariff tensions escalate further or if a diplomatic resolution emerges.

Source:  (Reuters)

(Disclaimer: The information presented in this article is based on publicly available data and current market insights. Prices and policies are subject to change, and readers are encouraged to consult official sources for the latest updates.)

 

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