China Oil Purchases From U.S. Again Drop To Zero, Well Below Pre-Trade War Monthly Record Of $916 Million

U.S. exports of oil to China, a $5.4 billion market in 2018, fell to zero once again in October, according to Census Bureau data released last week.

It’s a second sign China is playing tough in the trade war with the United States as the two sides attempt to complete a partial deal prior to Dec. 15. That’s the date President Trump promised to impose tariffs on all remaining Chinese imports, without a deal.

The first sign China was playing tough was its tepid purchases of U.S. soybeans in the critical month of October, which fell well short of recent norms.

Of course, the United States is applying pressure of its own, beyond the tariffs already in place.

A rare bipartisan Congress overwhelmingly passed a bill supporting Hong Kong protesters, which President Trump signed, and the House and Senate have passed separate bills that need to be aligned, condemning Chinese treatment of Muslim Uighurs in China’s remote northwestern territory of Xinjiang.

Enter oil. Oil is an increasingly important U.S. export and China had been an important market, prior to the trade war.

Since then, China, now the world’s largest oil importer, replacing the United States last year, has been using oil to retaliate against U.S. tariffs.

Last year, China ranked third among the world’s buyers of U.S. oil, accounting for 11% of the total.

That market share, significant as it was, was down from 20% in 2017, before the impact of the U.S.-China trade war. In 2017, China had ranked second, trailing only Canada.

In 2017, in fact, it seemed the time was ripe for U.S. oil exports to China to continue.

Venezuela and Iran were hobbled by crises; the United States had recently ended a nearly complete, four-decade embargo on oil exports and was experiencing a surge of domestic production due to improved and greatly increased hydraulic fracturing; and China’s economy was still growing rapidly and in need of more oil to refine into gasoline.

In May of 2018, U.S. exports to China were a record $916.04 million.

Then the U.S.-China trade war took hold. In retaliation for U.S. tariffs on Chinese imports, China placed tariffs on some U.S. exports and, in the case, of oil, stopped buying it for four months, from August through November.

The percentage of U.S. oil experts sent to China slipped to 11% and it fell behind not only Canada but South Korea as well by year’s end.

As China replaced the United States as the world’s leading oil importer, it came to rely more on Russia and Saudi Arabia, which registered sharp increases.

This year, through October, both China’s percentage of U.S. oil experts and its rank continued to slide.

This year, China accounts for 5.2% of all U.S. oil exports and ranks seventh. Today, it also trails the Netherlands, India, the United Kingdom and Taiwan in addition to Canada and South Korea.

Due to a decrease in U.S. exports of oil, soybeans and lumber to China as well as a steep decline in U.S. imports from there, China has fallen behind Mexico and Canada to rank as the nation’s third most important trade partner.

October was not the first time U.S. oil exports to China fell to zero this year. When it failed to purchase any U.S. oil in January, it had marked the fifth month in six without any purchases.

From February through September this year, however, U.S. oil sailed to China, though only in May did the value top $500 million. That total was, of course, well below the 2018 record the previous May. In October, all shipments ceased.

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