Russell: China's impact on US energy trade is minimal at first.
China responded to the tariffs imposed by President Donald Trump with its own measures, effectively killing off trade between the United States in crude oil and liquefied gas as well as coal. China, which is the largest importer of these three commodities in the world, imposed import duties on Tuesday of 15% for U.S. coal and LNG, and 10% for crude oil and farm machinery.
Beijing made its move after the Trump Administration imposed an extra 10% tariff on all Chinese imports into the United States. The 10% tariff was less than the 60% Trump had threatened during his last-year campaign to reclaim U.S. president, but it was enough to trigger an immediate response by China.
China's response raises the possibility of further US moves, and escalates trade tensions between the two world's largest economies.
A series of tit for tat measures could cause global economic growth and inflation to slow down as countries reorder their supply chains and face increased disruptions in industries like manufacturing and construction.
The immediate impact on U.S. imports of crude oil, LNG, and coal will likely be minimal.
According to Kpler, commodity analysts, China imported 5,99 million barrels from the United States of crude oil in January.
It is about 193,000 barrels a day. This is less than 2% the total amount of imports from China.
The volume of January's imports was typical of recent months. However, China has imported U.S. crude at times, and the 948,000 barrels per day of June 2023 was the highest in the last two years.
In recent months, China's LNG imports have been modest. January saw a drop from 220,000 metric tons in December to 190,000 tons in January.
LNG volumes fluctuated a lot, reflecting the nature of spot trade between China and the United States, but in October 2010, 780,000 tons was the highest volume in the last two years.
China's total LNG exports are currently averaging 6.5 million tonnes per month, which means the U.S. supplies between 4% to 12% of that total.
Kpler reports that China imported 1.34 million tonnes of coal from the United States in January. The highest month over the last two years was August, when 1.55 million tons were imported.
China's coal imports in 2024 will average 45.2 million tons per year, according to official customs data. The U.S. is a minor supplier.
BROADER IMPLICATIONS
The question is whether the tariffs on energy imports imposed by Beijing will have any impact. Both China and the United States are likely to be able to adapt without much difficulty.
Answer: It amplifies tensions. And it accelerates the trend to increasingly split the world into two trade blocs. One that deals with Trump's America, its allies and the other that prefers China and the so-called global south.
As part of the "America First" agenda, Trump may continue to impose tariffs on both his traditional allies as well as his rivals. This policy could drive commodity producers towards the emerging BRICS bloc. China has also announced new controls on the export of five minerals used in the defence and energy industries.
The metals tungsten (tellurium), bismuth (indium), indium, and molybdenum as well as their products are covered by the controls that come into force immediately.
These measures will encourage Western nations to seek out and develop their own sources of energy.
This will require that we engage with businesses and governments from Africa, Asia, and Latin America. Many of these are likely to become targets of Trump’s tariffs and aid measures.
These are the views of the columnist, who is also an author. Mark Potter edited this article.
(source: Reuters)
