On 23 August China implemented US$16Bn of tariffs on US goods entering the country as part of the tit-for-tat trade war started by President Trump.
At the time, BIMCO’s chief shipping analyst Peter Sand commented “85.3% of Chinese seaborne imports from the US and 58.5% of US seaborne imports from China could become affected by the trade war, if the US and China implement tariffs on a further US$200Bn and US$60Bn worth of goods respectively.”
Although there was speculation at the time, no tariffs were placed on importing US crude oil.
However, there were further tariffs on oil products, which is one sector the US competes in with China. Oil products were targeted with 0.5M tonnes worth of this seaborne trade tariffed from 23 August with a further 0.7M tonnes added in the US$200Bn list.
Mr Sand noted “By excluding crude oil imports from its US$16Bn list, China has halted tariffs on 10.5M tonnes worth of seaborne crude imports from the US.”
China's decision to exclude tariffs on crude oil imports has observers falling into two schools of thought. One is that China needs to hold back the biggest penalty on the US for punishment later.
In this respect, China is trying a subtle approach, imposing tariffs on US services which take longer to have an impact but are harder to unwind, as once a Chinese replacement is found and developed, why go back to the US service?
The second school of thought is that China needs US crude oil. However, tariffs, like sanctions, have a way of creating alternate energy supplies, which could become permanent. Certainly, OPEC will not be unhappy if US crude oil is excluded from the Chinese market later, although China and Iran may already have a plan in place to bolster crude oil supplies.
Business, operational and technical issues impacting the crude, product and chemical tanker trades will be discussed in London at the Tanker Shipping & Trade Conference, Awards & Exhibition, 20-21 November 2018.
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