China’s petroleum industry expects Beijing to be cautious about imposing countermeasures on energy imports from the US in response to Donald Trump’s additional10% tariff on Chinese goods while monitoring the market to capture opportunities to bring in more Canadian and Mexican crudes at competitive prices, multiple sources said Feb. 3.
Washington will impose an additional 10% tariff on goods from China, a 10% tariff on energy imports from Canada and a 25% tariff on energy imports from Mexico, starting Feb. 4.
China’s Ministry of Commerce spokesperson said on Feb. 2 that the country will file a lawsuit with the WTO and take corresponding countermeasures to safeguard its legitimate rights and interests in response to the tariff.
“Adding tariffs on US energy products is not a good countermeasure, as it is one of the limited areas where the top economies can cooperate, and it threatens China’s energy security,” said a Houston-based source with a Chinese state-run oil giant. He added that imposing tariffs on US energy products would be the worst and final step in the negotiation process.
Despite being the world’s fourth-largest crude oil producer by volume, China relies on imports for around 70% of its supply. US recent sanctions on Russian and Iranian barrels have disrupted crude supplies to China.
China imported 193,000 b/d of crude from the US in 2024, down 33% year over year, according to Chinese customs data.
The flow from the US hit a record high of 396,000 b/d in 2020, as China agreed to purchase an additional $52.4 billion worth of energy products in 2020-2021 compared with 2017 under the phase 1 trade deal signed on Jan. 15, 2020.
Before the agreement, Beijing announced additional tariffs on several US energy products, led by 25% on LNG and 5% on crude oil, in response to the duties initiated by Trump’s government on Chinese goods.
Commodity Insights projected China’s crude imports to rise 41,000 b/d from 2024 to 11.04 million b/d in 2025.
Eye on Canadian, Mexican crudes
Meanwhile, a few Chinese refiners stated they would monitor any slowdown in Mexican and Canadian crude flows to US refineries that could lead to more attractive offers for Asian buyers of Isthmus, Maya crudes, Cold Lake Blend, and Western Canadian Select crudes.
“We will definitely take more barrels from both countries if the prices are attractive,” said a Beijing-based trading source with a second state-run oil giant. “There are some uncertainties, such as whether the Canadian crudes will attract the tariff when coming via US pipelines, as well as the trend of freight and how high it will be,” he added.
China increased its crude imports from Canada by 22% year over year to 184,000 b/d in 2024, according to Chinese customs data, as the Trans Mountain Expansion (TMX) pipeline launched in May. The pipeline offers an economical feedstock option for Asian buyers due to the short voyage and competitive prices of heavy sour Western Canadian crudes.
Currently, China has taken most of the March delivery cargoes—not only from independent mega refineries Zhejiang Petroleum & Chemical and Shenghong Petrochemical but also from state-run refiners PetroChina and Sinopec, market sources said.
Market sources indicated that China has likely taken almost 7 million barrels for March delivery, surging from about 4.5 million barrels for February delivery.
Crude imports from Mexico, however, slumped 36% year over year to about 21,000 b/d in 2024, according to Chinese customs data.
Limited impact on oil exports to US
The US imported merely 5.79 million barrels of petroleum products from China over January-November, despite increasing from 3.77 million barrels in the same period in 2023, data from the US Energy Information Administration showed. Of the petroleum products, 47% were jet fuel kerosene and 45% were conventional gasoline blending components.
Some Chinese product exporters said their outflows to the US would tumble if the 10% additional tariffs are imposed on top of the 4% value-added tax they are required to pay on their clean product exports starting Dec. 1.
The flow only accounts for a tiny proportion of China’s fine clean oil product exports, which stood at 291.86 million barrels in 2024, the customs data showed.
China-based trading and refining sources and analysts said the US 10% tariff on Chinese goods will dampen the country’s economy and, thus, the country’s demand for oil and petrochemical products.
However, “it is just the start of negotiations; it is hard to tell how long the tariffs will last, how high they will reach, and if any deal can be made,” an independent refiner said.
A Singapore-based analyst said China may also use Trump’s tariffs as an opportunity to position itself as the global champion of free trade, however, it would take time and depend on the negotiation results.
Commodity Insights projects China’s GDP growth to slow to 4.2% in 2025, down from 5% in 2024. This reflects the negative impact of proposed US tariff hikes on exports and private confidence. China’s oil demand is expected to increase by 270,000 b/d in 2025 year over year, driven by petrochemical feedstock, according to a monthly report released on Jan. 27.
Source: Platts
