China decides tariff on oil is a bad idea
China abruptly changed course Wednesday and removed oil from a list of American products it is subjecting to tariffs, as the energy-hungry country acknowledged the limits on trade war losses it can absorb.This is another example of why China needs to drop its protectionist policies and make a deal with Trump on fair trade. It would be in the interest of China to make such an agreement.
Beijing announced on Wednesday that it would impose retaliatory 25 percent tariffs on $16 billion worth of U.S. imports, a response to the Trump administration after it issued similar tariffs against China on Tuesday.
China's new tariffs will target U.S. automobiles, steel products, medical equipment, and some energy products, including coal, diesel, gasoline, and propane.
But for now, China will not put tariffs on U.S. crude oil. An early draft of potential tariff targets published by China in June did include crude oil.
China is the largest U.S. market for crude exports. Experts say China spared U.S. oil because it may struggle to get it elsewhere due to disruptions from other major suppliers.
“China’s decision to take crude oil off the list may signal its realization that the country would have more to lose from a 25 percent tariff on U.S. crude as the supply related uncertainty deepens in the global oil market,” said Jane Nakano, a senior fellow in the Energy and National Security Program at the Center for Strategic and International Studies. “Denying itself access to U.S. crude would have made crude oil imports more expensive for China and may have triggered energy security concern, especially if world developments drive up the global oil prices.”
U.S. crude oil exports to China went from nothing before 2016 to a record 15 million barrels in June.