Global oil prices dipped sharply on Friday after China retaliated against the United States by increasing tariffs on American goods from 84% to a staggering 125%, intensifying an already fraught trade standoff between the two largest economies in the world.
The announcement, made by China’s Ministry of Finance, condemned the U.S. actions as a violation of international trade norms, describing Washington’s approach as “unilateral bullying and coercion” that undermines the principles of fair commerce. “The U.S. imposition of abnormally high tariffs on China seriously violates international and economic trade rules, basic economic laws, and common sense,” the ministry stated.
Prior to the tariff escalation, oil markets had shown modest gains, but sentiment quickly reversed following China’s announcement. As of press time, West Texas Intermediate (WTI) had slipped to $59.91 per barrel, while Brent crude dropped to $63.16 per barrel.
Trump’s Mixed Messaging Clouds Market Outlook
Earlier in the week, U.S. President Donald Trump signaled a temporary de-escalation of tensions by announcing a 90-day freeze on additional tariffs targeting global trading partners. However, China remained squarely in focus for further U.S. tariff action. The Trump administration had hinted that nations choosing not to retaliate would receive favorable treatment, an overt attempt to isolate Beijing diplomatically.
China’s decision to strike back, however, dashed hopes for a swift resolution and reignited fears of a prolonged trade war. The Chinese State Council’s Tariff Commission minced no words in its reaction, warning that continued U.S. tariff aggression “will no longer make economic sense and will become a joke in the history of world economy,” as translated by CNBC.
Oil Markets React to Prolonged Uncertainty
The back-and-forth between Washington and Beijing has fueled volatility across global markets, with equities staging a brief relief rally following the temporary tariff pause. However, crude oil has continued to absorb the brunt of investor anxiety, with traders increasingly concerned that a prolonged trade war could dampen global demand for oil.
“While the pause offers some relief to markets, there’s still plenty of uncertainty on the trade front,” said ING analysts Warren Patterson and Ewa Manthey in a Thursday research note. “This uncertainty is still likely to drag on global growth, which is clearly a concern for oil demand. Still, conditions are not looking as bad as they were just a few days ago.”
Friday’s losses mark the second consecutive weekly decline in crude prices, as fears mount that escalating tariffs and sluggish global growth will weigh heavily on energy consumption.
Looking Ahead
With geopolitical tensions showing no sign of easing, the energy sector remains vulnerable to sharp price swings and policy shocks. Analysts warn that unless both Washington and Beijing de-escalate their tariff rhetoric, oil markets may face sustained downward pressure in the near term.
For now, investors are watching closely for further policy signals, hoping for a more coordinated effort to stabilize trade relations and restore confidence in global markets.
