China's Oil Sanctions on US Crude Have Minimal Impact
China's recent implementation of 10% retaliatory tariffs on US oil imports has failed to significantly affect American crude exports. Despite an initial dip in futures prices, most losses have been recouped.
This muted response stems from the declining share of US oil exports to China. Accounting for under 5% of total exports in 2022, the reduced volume can be easily absorbed by other buyers in Europe and Asia, including South Korea and Japan. South Korea remains the second-largest destination for US crude, importing around 500,000 barrels daily.
Factors contributing to China's declining demand for US oil include economic challenges and a shift toward electric vehicles. As a result, China has expanded purchases from Russia and Iran.
The Chinese tariffs on US oil take effect on February 10. However, negotiations may be pursued as President Xi Jinping potentially seeks a reprieve similar to that granted to Canada and Mexico. While tariffs may be lifted for Mexico and Canada, the same outcome is unlikely for China, viewed as a trade adversary.