Trade Tit-For-Tat Impacts U.S. Energy, Consumers
Mark Green
Posted August 26, 2019
News item: China announces retaliatory tariffs on $75 billion worth of U.S. goods, including a first-ever tariffs on U.S. crude oil imports. In response, President Trump says previously announced tariffs on Chinese goods will go up. The U.S.-China trade war churns on and with it, there’s significant collateral damage.
We discussed the impacts before – the way trade restrictions threaten U.S. competitiveness and global energy leadership, the drag on the U.S. economy and how the administration’s tariffs hurt U.S. consumers, not China.
The latest trade tit-for-tat is similarly damaging. Kyle Isakower, API vice president of regulatory and economic policy:
“This escalation of the U.S.- China trade war is another step in the wrong direction, the consequences of which will be felt by American businesses and families. In addition to the impacts on the U.S. economy and jobs, U.S. energy leadership and global competitiveness are threatened as U.S. natural gas and oil exports continue to serve as targets for retaliation.”
The effects on the U.S. natural gas and oil industry – a key economic driver and support for America’s energy leadership around the world – are real. China, a leading importer of crude oil, slashed imports of U.S. crude after the administration first imposed tariffs on Chinese goods. In the nine months from October 2017 to June 2018, before the U.S. first imposed Section 301 tariffs on imports from China in July 2018, China received 22% of total U.S. crude oil exports and 4% of total U.S. refined products exports. In the nine subsequent months, from July 2018 to March 2019, China’s imports of U.S. crude dropped to 3% of total U.S. crude oil exports and 2% of total U.S. refined products exports.
Our industry also has been hit by administration tariffs on more than 100 industrial products under Section 301 and by steel tariffs under Section 232. With the rapid growth of U.S. liquefied natural gas exports, engaging in a trade war with China is limiting U.S. access to one of the world’s largest energy markets.
But the impacts extend beyond natural gas and oil. Myron Brilliant, U.S. Chamber of Commerce:
“While we share the President’s frustration, we believe that continued, constructive engagement is the right way forward. Time is of the essence. We do not want to see a further deterioration of US-China relations. We urge the administration and the government of China to return to the negotiating table to complete an agreement that addresses concerns over technology transfer practices, intellectual property enforcement, market access, and the globally damaging impact of Chinese domestic subsidies.”
Zippy Duvall, American Farm Bureau:
“China’s announcement of imposing additional tariffs on $75 billion of U.S. imports signals more trouble for American agriculture. … [W]e know continued retaliation only adds to the difficulties farm and ranch families are facing and takes the situation in the exact wrong direction.”
This is continued bad news for the U.S. economy and U.S. consumers – because, remember, tariffs are paid by importers, not countries. It’s also bad for the momentum of U.S. energy.
The shale energy revolution, built on a foundation of advanced, modern hydraulic fracturing and new innovations in horizontal well construction, has made the United States the world’s leading producer of natural gas and oil and with it, economic growth, increased energy security and influence in the world. Current tariff policies are unforced errors that could restrict the benefits of domestic energy abundance. The reality is these tariffs have hurt U.S. energy trade more than they’ve hurt China. RBC Capital Markets’ Michael Tran to Reuters:
“With China being the world’s foremost crude import growth region, U.S. producers need China, not the other way around. The U.S. will have to find alternative buyers for their crude, which will be a challenge given the weakening global demand backdrop.”
We understand the administration’s goal of bringing a fairer balance to U.S.-Chinese trade. But at some point the cure becomes worse than the underlying disease. It’s time for reasoned discussion and reasonable solutions. Isakower:
“We urge the Administration to quickly come to a trade agreement with China that would lift all tariffs under Section 301, including the damaging retaliatory tariffs on American energy exports.”
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and six grandchildren.