China’s Unipec will resume purchasing US crude oil in October, following a two-month hiatus from trade disputes between the two economies. A few months ago, Beijing excluded crude oil in its tariff list. But in August, China changed its policy again, effectively including crude oil back in the list. Unipec will be buying oil again, and loading in October, which will then reach Chinese shores in November or December.
The Effect on China Oil Import
Prior to the trade dispute, China was the largest importer of US crude oil in 2018, surpassing Canada. It imported about 350,000 barrels of oil every day, according to the US Energy Information Administration.
China put crude oil in its tariff list as an act of retaliation to the United States. In June, Beijing announced that it is imposing a 25 percent tariff on crude oil sourced from the US.
Consequently, Unipec’s imports shrunk, and there were talks of purchasing oil from other countries like Qatar and Papua New Guinea. It is, however, estimated to return to normal as volumes increase over time. It was not disclosed how much oil it would be buying from the US. There were also reports that the October purchases were probably meant for third-party trading and might be sold to other countries.
Unipec is the trading arm of Sinopec, Asia’s biggest refiner. It is also one of the biggest customers of US oil. It lobbied for the exclusion of US oil in the tariff list. In August, the list no longer had the high tariff rates for US crude oil.
Looming Trade War
It seems this goes beyond mere trade tiffs. President Donald Trump has been outspoken about suspicions he has about China’s trade and political practices. He has accused China of stealing tech and trade secrets from the US and taking millions of jobs from Americans, among many other issues. Because of this, the Trump administration sees China more as a competitor than a partner nation. In July it realized its threat to impose tariffs on $34 billion worth of Chinese products, including aircraft parts, televisions, and medical devices. Goods marked for tariffs have a 25 percent border tax as they enter the US. In effect, the US may be punishing China by making Chinese products extremely expensive for American businesses and consumers.
China then accused the US of initiating the largest trade war in history. As a response, China also imposed 25 percent tariffs on $34 billion worth of goods entering China. This includes automobiles and food, such as lobsters and soybeans. Trump further threatened to hit China with another multibillion-worth round of tariffs on Chinese goods.
On September 17, 2018, Trump announced tariffs on $200 billion worth of Chinese goods. This included a wide range of products, from minerals for manufacturing, electronics, and health and safety products. The previous tariff list concentrated mostly on industrial machinery, while the newest list exhaustively includes consumer products. All these goods require a 10 percent duty until the end of the year and will increase to 25 percent at the start of 2019.
The tug-of-war continued as China threatened to impose $60 billion worth of tariffs on US products. Should this happen, the Trump administration will respond with an extra $267 billion worth of imports. On September 24, 10 percent of tariffs on $200 billion worth of Chinese goods went into effect. Prior to this day, Chinese exporters rushed to bring their products to the US to beat the deadline. Beijing then accused Washington of “economic intimidation,” as the standoff between the two nations continued. The friction between the two economic giants is only growing, and it seems that there is no foreseeable end to the trade fight.
World Trade on the Balance
China oil imports are just a small segment of a larger, undulating political landscape. While it is reassuring for China that they will be purchasing oil at a normal rate, this signals the start of a possible long-standing intimidation game between the US and China. The rest of the world is on the edge of their seats anticipating how these two countries will engage with each other in the coming months and years. Billions of spectators are hopeful that the US and China may forego its shifting trade relations, and instead energize the oil industry and the global economy.