FACTBOX: US-China tariff deal lifts oil prices, likely to revive oil, LPG trade flows

2025/05/14 10:37

The US and China agreed to slash reciprocal tariffs on most imported goods during a 90-day pause, which could revive some oil and LPG trade between the two countries.

By May 14, the US will reduce tariffs on most Chinese goods to 30% from 145%, and China will lower its levies on American imports to 10% from 125%, according to a joint statement released by the US and Chinese government May 12.

US-China trade and goods shipments have recently plummeted due to retaliatory tariffs, leading to a downgrade in GDP expansion to 3.7% and downward adjustments in oil demand growth to 78,000 b/d in China for 2025, according to analysts at S&P Global Commodity Insights. This is down from earlier forecasts of 4.2% and 270,000 b/d made in January.

"The larger-than-expected tariff reductions are likely to revive some trade between the US and China, which had been completely shut by previous high tariffs. This development is BULLISH for oil prices, although it may take time for trades to fully resume," said Commodity Insights analyst Zhuwei Wang.

"It is important to note that the tariff reductions do not apply to those from the first Trump administration, which account for approximately 15%-20%. Consequently, Chinese goods exported to the US will still face tariffs between 45% and 50%. Additionally, China's 15% additional tariffs on US coal and LNG imports, along with 10% on crude oil, agricultural equipment and heavy trucks, which were announced in February, remain unchanged," Wang said.

Ethane imports from the US have been exempted from tariffs.

Metals and mining groups were deciphering the specifics of the deal, specifically related to non-tariff countermeasures. A joint statement by the two countries states that China has agreed to suspend several other retaliatory measures, but the agreement's language does not provide details.

Prices

OIL

Oil prices rallied on news of the trade deal, with Platts assessing Dated Brent at $65.065/b May 12, up $1.475.
NYMEX WTI climbed $2.89 to an intraday high of $63.91/b before easing to settle at $61.95/b, up 92 cents. Crude futures had already climbed ahead of the announcement on optimism that a deal would be reached.

LNG

Platts assessed FOB Gulf Coast LNG cargoes at $10/MMBtu, up from $9.91/MMBtu the prior trading day.
Asian markets were closed May 12 for a holiday. On May 9, Platts assessed the JKM marker -- the benchmark price reflecting LNG delivered to Northeast Asia -- for June at $11.937/MMBtu, up 19.5 cents/MMBtu day over day and 93.1 cents/MMBtu week over week, on competition between Asian and European destinations.

LPG

Platts assessed Enterprise Propane at Mt. Belvieu at $75.875/MMBtu May 12, up $3.875 day over day.
Platts assessed Northwest Europe Propane cargoes at $476.75/mt May 12, up $28.50/mt day over day on strength in crude prices and also on expectations that with more US LPGs heading to Asia, European prices would need to rise to lure US cargoes.

CONTAINERS

Container freight rates remained steady May 12, with Platts assessing PCR 23 -- Southeast Asia to West Coast North America -- at $2,200/FEU, and PCR 25 -- Southeast Asia to East Coast North America -- at $3,200/FEU.
Market participants were cautiously optimistic that vessel utilization from China might rise because of the lower tariffs.

Trade flows

OIL

The US has not exported crude to China since February, when it shipped 100,000 b/d of WTI Midland and Mars crude, according to S&P Global Commodities at Sea data.
The US last exported refined products in March, when it shipped 32,000 b/d of undefined clean products, chemicals and lubricants, CAS data shows.

LNG

The trade deal is still not expected to encourage US LNG imports into China, as the 25% tariff remains prohibitively high, according to trading sources.
China has not imported LNG from the US since February, when a 15% retaliatory tariff was first imposed on US LNG, with some US cargoes resold, CAS data shows.
Platts reported May 9 that four June cargoes were traded that week, including PetroChina selling cargoes to Vitol for June 16-18 and June 19-21 at $12/MMBtu.

LPG

US exports of propane, ethane and butane to China have fallen to a combined 397,000 b/d in April from 910,000 b/d in March, CAS data shows. The bulk of that decline has been seen in propane and butane, as China has waived its tariff on imports of ethane from the US.
Market sources noted that with previously announced high tariffs, US LPG cargoes would struggle to find a home in Asia and thus had anticipated seeing US LPG flooding the European market. With tariff relaxation, US LPG cargoes are likely to be sent back to Asia on the back of stronger arbitrage economics.
The arbitrage between the US and Europe is currently closed, meaning NWE would have to incur a significant premium to lure US cargoes. Conversely, there is significant strength in the East, where Platts assessed US-Asia arbitrage levels at $123.50/mt on May 9, excluding terminal fees.
The tariff cuts relieve China's propane dehydrogenation plants, as US propane holds more than 58% of the market share in China's imports of the product.

METALS

US tariffs on steel, aluminum and auto exports remained unchanged by the deal as they were not included in the reciprocal tariffs.
Chinese steel products will still be subject to a tariff hike of 45%, imposed in 2025, bringing the total tariff on steel imports from China to 70%.
As the steel exports to the US accounted for only 0.8% of China's total steel exports, a 70% tariff on steel is not expected to have a direct impact on China's export markets, said some Chinese steel traders.
Chinese aluminum exports are expected to remain elevated in the coming months, as the re-export rush continues, market sources said.
Chinese imports of copper scrap from the US might gradually resume if tariffs on US goods are reduced to 10%, they said.

LITHIUM-ION BATTERIES

Battery technology and project developers have been heavily disrupted by US-China trade tensions, given the segment's reliance on imported lithium-ion battery cells, leading to project delays and cancellations.
The US imported nearly $53 billion in electric storage batteries and parts from China between 2021 and February 2025, and China accounted for roughly 82% of US lithium-ion battery imports in the fourth quarter of 2024, according to S&P Global Market Intelligence data.
With general US tariffs on Chinese goods falling to 30% from 145%, the total combined rate for lithium-ion batteries imported from China is 58.4% for electric vehicle batteries and 40.9% for non-EV uses in 2025, including additional tariffs that apply.

Infrastructure

OIL

With tariffs likely increasing the costs for pipes, wellheads and electrical equipment, oil service companies have been working to reduce their exposure to tariffed goods.
Oilfield services and technology provider Baker Hughes said April 23 its US operations benefit from a broad US manufacturing footprint and "resilient" local supply chain, although there should be some cost impacts tied to imports from China, Germany and the UK.
Oilfield services/equipment provider NOV said April 29 that while it is taking action to reduce exposure to tariffs in its downhole business, the company is the only drill pipe provider in the US that does not depend heavily on China for supplies. NOV's drill pipe manufacturing plant in Texas is the largest in the world and produces the highest-quality, most technically advanced drill pipe that has enabled super extended lateral and ultra-deepwater drilling, the company said.

LNG

The US-China trade tensions have not stopped the expansion of US LNG terminals.
Golden Pass LNG has asked to deploy a larger workforce with expectations of shipping first gas by the end of the year.
Golden Pass will join two new US LNG capacity additions that are ramping up production along the US Gulf Coast: Venture Global Inc.'s Plaquemines LNG terminal in Louisiana and a midscale expansion of Cheniere Energy Inc.'s Corpus Christi terminal in Texas.