Oil prices rose by more than 1 percent early on Thursday after U.S. President Donald Trump said that the United States was very close to some sort of a deal with China and as the U.S. has reportedly offered China to roll back some existing tariffs and cancel a new round of tariffs set to take effect on December 15.
At 11:06 a.m. EDT on Thursday, WTI Crude was up 1 percent at US$59.35 and Brent Crude was trading up 1.13 percent at US$64.44.
Earlier on Thursday, President Trump tweeted “Getting VERY close to a BIG DEAL with China. They want it, and so do we!”
According to people briefed on the protracted U.S.-China trade negotiations by The Wall Street Journal, the U.S. has recently offered to Beijing to reduce some of the current tariffs by as much as 50 percent, if China pledges to buy big volumes of U.S. agricultural products, protect U.S. intellectual property rights, and allow more access to its financial services sector. Otherwise, there would be no ‘phase one’ deal, according to the WSJ’s sources.
“The ball is in China’s court now,” one of the people briefed on the American offer told the Journal.
If the U.S. and China don’t reach some sort of agreement by midnight this coming Sunday, the U.S. could slap tariffs on another US$156 billion worth of goods that America imports from China, mostly consumer products, including laptops, mobile phones, toys, and clothing.
President Trump has not announced yet whether he would follow through or delay the December 15 tariffs, and he is expected to meet later on Thursday with his economic team to discuss the state of the trade negotiations with China.
Although previous ‘pledges’ in those negotiations haven’t stuck, even a small and partial ‘phase one’ deal with China could alleviate market and investors’ concerns about flagging global economic growth and, as a consequence, global oil demand growth.
By Tsvetana Paraskova for Oilprice.com
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China no longer believes President Trump’s word. Therefore, China will insist on a full lifting of tariffs on its exports before it adds its name to any deal with the United States.
According to the Wall Street Journal (WSJ), the US has recently offered to reduce some of the current tariffs by as much as 50% if China pledges to buy big volumes of US agricultural products, protect US intellectual property rights, and allow more access to its financial services sector otherwise there would be no ‘phase one’ deal.
For such demands, China which will insist on the immediate lifting of all tariffs on its exports and non-interference by the United States in its affairs and Hong Kong's.
The ball is not in China’s court. It is actually in the United States’ court. China which has already won the trade war could easily outwait the United States on tariffs. China’s economy is 28% bigger than the United States’ based on purchasing power parity (PPP) and far more integrated in the global trade system thanks to its Belt & Road Initiative.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London