Goldman Sachs: China's Tariffs to Have Minimal Impact on Energy Prices
Goldman Sachs anticipates minimal repercussions for energy prices from Beijing's retaliatory tariffs on U.S. goods.
Following the implementation of U.S. President Donald Trump's 10% tariff on Chinese imports, China levied tariffs of 15% on U.S. coal and LNG, and 10% on crude oil, farm equipment, and certain automobiles.
Goldman Sachs maintains that the tariffs will have a minimal short-term impact on commodity markets as they neither alter global supply nor demand. The firm believes that affected U.S. volumes will find alternative buyers, while China will source impacted imports from other suppliers.
Goldman predicts an increase in U.S. liquefied natural gas (LNG) exports, while additional supply from other Atlantic basin suppliers may be diverted to Asia.
"In coal, we anticipate U.S. volumes being redirected to Japan and Korea, potentially freeing up local Pacific basin supplies for China," Goldman Sachs analysts state, adding that U.S. crude oil imports to China are relatively small and easily reallocated.
Commodity freight rates are also likely to remain stable, despite the long distance between the U.S. and China, Goldman Sachs says.
However, the firm notes that the most significant potential impact on commodity markets is a possible slowdown in new long-term LNG contract negotiations between Chinese buyers and U.S. LNG export facilities.
Oil prices fluctuated at settlement Tuesday amidst the tariff tensions between Washington and Beijing.