Oil Tumbles 8% After China Retaliates in Global Trade War

The global oil market experienced a significant downturn on April 4, 2025, as China announced a 34% tariff on all US imports, effective April 10. This retaliatory measure, in response to President Donald Trump’s ‘Liberation Day’ tariffs, has sent shockwaves through the energy sector, causing oil prices to plummet by 8%. The move is part of a broader escalation in the ongoing trade war between the two economic superpowers, with far-reaching implications for the global economy.



The tariff, which matches the 34% rate imposed by the US on Chinese exports, is expected to significantly impact the flow of goods between the two countries. China’s Finance Ministry criticized the US tariffs, calling them a “typical unilateral bullying practice” that undermines international trade rules. The Chinese government also announced additional measures, including export controls on rare earths, which are crucial for the production of electric vehicle batteries and other high-tech products. This move could have long-term effects on the US oil industry, potentially increasing dependence on fossil fuels and raising production costs.

The impact of China’s tariffs on the global oil market is multifaceted. As the world’s largest importer of oil, China’s actions could lead to a shift in global oil trade flows. Countries not subject to the tariff, such as those in the Middle East or Russia, may see an increase in demand for their oil exports to China. This could benefit these countries’ economies and potentially increase their influence in global oil markets. However, the US oil industry could face reduced demand and lower production levels, leading to a decrease in US oil output.

The tariff could also have a ripple effect on global oil prices. If China reduces its imports from the US, it may increase imports from other countries, potentially driving up global oil prices due to increased demand from China. Conversely, the US may respond with retaliatory measures, further escalating the trade war and leading to additional disruptions in global oil markets.



The long-term effects of China’s export controls on rare earths could be even more significant. Rare earths are essential for the production of electric vehicle (EV) batteries and other high-tech products, and China’s dominance in this market gives it considerable leverage. The US oil industry could see an increase in demand for fossil fuels if the production of EVs and other high-tech products is hindered by the lack of rare earths. This is because EVs and high-tech products are often seen as alternatives to traditional fossil fuel-based technologies. As China’s export controls make it more difficult for the US to produce these alternatives, there could be a greater reliance on oil and gas.

The US oil industry could also face higher production costs if it becomes more difficult to access rare earths. Rare earths are used in a variety of high-tech products, including those used in the oil and gas industry. For example, rare earths are used in the production of catalysts, which are essential for refining crude oil into gasoline and other products. If the supply of rare earths is disrupted, the cost of these catalysts could increase, leading to higher production costs for the oil industry.

In conclusion, China’s retaliatory tariffs and export controls on rare earths could have significant implications for the global oil market. The tariffs could lead to increased costs for US oil exports, a shift in global oil trade flows, and potential disruptions in global oil markets. The long-term effects on the US oil industry could include increased dependence on fossil fuels, higher production costs, and potential geopolitical tensions. As the trade war between the US and China continues to escalate, the global oil market will likely face further volatility and uncertainty.