For decades, Trump has been vocal on trade issues. In the 80s, he argued that the United States was being taken advantage of by its allies and enemies. Specifically, he was always vocal about Europe and how it treats American companies. He was also vocal about South Korea and Japan, some of the biggest American trading partners.
In the 90s and 2000s, he continued with these views. He bought newspaper ads, appeared in conservative conferences, and events to advance his views. He was always critical of American commitment to help protect countries like South Korea and Japan. He criticized Germany for not paying its fair share in NATO.
As president, in the first year, the president surrounded himself with globalists like Rex Tillerson, H.R. McMaster, and Gary Cohn who advocated for a more open market system. This year, these people – who were known as the grownups in Trump orbit – were booted. In their place, the president got Mike Pompeo, John Bolton, and Larry Kudlow respectively. These people allowed Trump to be himself and advocate for the issues he has always wanted.
In March, he announced that he would impose steel and aluminum tariffs from all importers. He did this to protect the steel and aluminum industry in the US. A short while later, he announced that he would impose tariffs on goods worth more than $50 billion from China. For a while, the tariffs were halted as the two countries engaged in negotiations.
Last week, the president announced that the tariffs on hundreds of Chinese goods would apply. In response, China announced that it would also impose tariffs on several industry-specific products. Their product list was specific. For example, they would tax soybeans and other agricultural products to punish farmers who voted for Trump.
The biggest news from their list was the tariffs on crude oil, natural gas, and processed oil products from the United States. In recent years, the US oil producers have increased their crude oil production with most of it going to China. The chart below from Reuters shows the US crude oil productions to China. As shown, it has been rising steadily since 2017. This industry is worth almost $1 billion every month.
Crude oil is produced in many countries. Some of these countries will gladly fill in the gap left by the United States in China. Worse, the countries likely to fill the gaps are those at odds with the US. For example, China is likely to increase its imports from countries like Venezuela and Iran, which US has sanctioned. This will likely increase the friction between US and its largest trading partner. In addition, the absence of China from US supplies is likely to lead to a collapse of the US crude oil and natural gas industry.
After the news was announced last week, the price of crude oil fell sharply. The same was seen among crude oil-related stocks from the United States like ExxonMobil and Chevron. Initially, these companies were expecting to boost exports after China announced that it would import more oil to bridge the deficit with the United States.