Friday, July 13, 2018

What Chinese tariffs on U.S. energy exports could mean

China has targeted President Trump's voting base with tariffs on agricultural products like soybeans, but its willingness to levy tariffs on American energy exports such as crude oil, liquefied natural gas, and refined energy products, sends some complicated messages, Meghan O'Sullivan writes for Bloomberg.

Bringing in enough energy imports to fuel its economic growth has been a Chinese priority since the 1990s, so China's willingness to create obstacles to that objective suggests several things. For one thing, it looks like China thinks (probably correctly) that the energy tariffs will probably hurt the U.S. more than they will hurt China, O'Sullivan writes. It also suggests that China is confident that global natural gas markets are going to be cheap and abundant for the foreseeable future.

"Alternatively, the Chinese may have decided that, whatever the costs, they are not comfortable relying on the U.S. as a source of one of their most strategically important commodities, regardless of the financial risks that such a decision may entail," O'Sullivan writes. Besides hurting U.S. businesses, Chinese energy tariffs could also "strike one item off the rapidly dwindling list of areas in which the U.S. and China can identify common interests and see value in cooperation."

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