Washington — US President Donald Trump on Sunday threatened to raise tariffs on Chinese goods that could put trade discussions planned for this week in jeopardy and trigger retaliatory tariffs by Beijing that impact crude oil and LNG trade flows.
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China currently does not impose tariffs on US crude imports, and implements a 10% tariff on US LNG. A tit-for-tat escalation, as seen in 2018, would mean that Beijing imposes a 25% tariff on both US LNG and crude imports in response to Washington.
Trump, in tweets Sunday afternoon, complained the trade deal talks were going "too slowly."
The 10% tariffs on $200 billion worth of Chinese goods, imposed by the US under Section 301 of the 1974 Trade Protection Act "will go up to 25%" on Friday, he said. An additional $325 billion of Chinese goods imported into the US "remain untaxed, but will be shortly at a rate of 25%," he said.
"The tariffs paid to the USA have had little impact on product cost, mostly borne by China," Trump tweeted. "The trade deal with China continues, but too slowly, as they attempt to renegotiate. No!"
Later, in an interview with Fox News, National Economic Council Director Larry Kudlow elaborated on the White House message. "The president is I think issuing a warning here, that we bent over backwards earlier. We suspended the 25% tariff to 10%," he said.
He added talks have made great progress, but more work remains to be done and the US would continue the tariffs if negotiations do not work out.
Chinese negotiators were scheduled to come to Washington this week for another round of negotiations.
US CRUDE AND LNG
US crude exports to China could once again become collateral damage in the trade dispute, as they did when the conflict heated up in July, said Kevin Book, managing director of Washington-based ClearView Energy Partners.
The flows to state-owned Chinese refiners stopped for three months in a row despite not being specifically targeted by China's retaliatory tariffs.
US crude exports to China disappeared in August through October, and again in January, according to Energy Information Administration data. They reappeared in February at 145,000 b/d, well below the monthly peak set in June 2018 at 510,000 b/d, EIA data showed.
Book said Sunday the standoff poses significant risks to the US energy sector.
"US energy companies could continue to face first-order risk from escalating tariffs and countermeasures, second-order risk from new barriers to market development and tertiary risk from trade frictions that could erode global energy demand," he said in a note to clients.
Risks are higher now for US LNG exporters and LNG terminal developers hoping for a thaw in trade relations.
Trade tensions between the two nations have held back some long-term contracts between US LNG developers and potential Chinese buyers, and administration officials last week described progress in talks, fueling some hopes a broader trade deal might be forthcoming shortly.
ClearView Energy Partners interpreted Trump's threat as being conditioned upon a failure to reach a deal when Chinese negotiators resume talks in Washington Wednesday. These talks could now be in jeopardy.
Last year, Trump had threatened to increase the 10% tariffs to 25% by January 1, 2019, but he has twice put that off pending the ongoing trade talks.
ClearView said prior Chinese retaliation had targeted hydrocarbon exports, including LNG, raising the possibility that further retaliation could ramp up Chinese LNG tariffs from the current 10% level.
An official with Cheniere Energy recently emphasized that despite the media attention given to trade disputes, LNG contract negotiations revolve around longer business cycles. The LNG industry has emphasized the longer-term commercial match between rising US production and projected increases in Chinese demand for LNG.
Nonetheless, the tensions add headwinds for US developers of new LNG projects seeking to secure long-term contracts that can support financing for the multibillion dollar developments.
(Adds impact on crude, more analyst comments)
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