The US-China tariff war has fundamentally changed the course of global energy trade, with lasting consequences for both countries and the international energy market. As the growth of energy trade between the US and China has been hampered by rising tariffs and mutual distrust, the Sino-American trade war has become a major source of uncertainty.
Before the trade war, China was a major buyer of US crude oil and liquefied natural gas, but the conflict has forced China to diversify its import sources. On the other hand, reduced access to the Chinese market has increased US reserves and intensified competition with alternative suppliers. This threatens the US’s “preserving energy supremacy” agenda. Given the multiple dimensions of the trade war and the wide-ranging impacts it will have on the energy sector, assessing this issue is of great importance.
Trade War
The trade war between the United States and China has escalated into a full-blown economic confrontation with significant implications for the global energy sector. The tariff war officially began in January 2018, when then-US President Trump imposed tariffs and trade barriers on China. The measures were aimed at changing what the US called China’s “unfair trade practices” and “intellectual property piracy.” By the end of 2019, the US had imposed tariffs on about $350 billion worth of Chinese imports, while China had retaliated with tariffs on $100 billion worth of US exports.
In 2025, with Trump back in the White House, tensions have flared again. The Trump administration increased tariffs on Chinese goods by 10% on February 1 and then by the same amount on March 4. In response, China imposed a 15% tariff on American goods, including agricultural products. Then, on April 2, the US raised the overall import tariff rate to 54%.
The US then increased its tariffs on Chinese goods to 145%, and China increased its tariffs on American goods from 84% to 125%. These increases represent one of the most intense trade disputes in recent history, fundamentally altering the course of bilateral trade and having profound impacts on the energy sectors of both countries.
Energy Trade Impact
The latest tariffs, a 125% tariff on Chinese goods and an 84% tariff on U.S. imports, have nearly doubled the price of U.S. oil in China compared to last year. The 84% tariff on US goods would nearly double the cost of US crude to China, or $51 more per barrel. This would make it uneconomical for Chinese refineries to import US crude.
To mitigate the impact of the tariff war on its oil and gas sector, China has adopted a multi-pronged approach, including increasing domestic production, diversifying import sources, and strengthening national energy security. China has also reduced its imports of gas and crude oil from the US and increased its purchases from traditional suppliers such as Australia for gas and Saudi Arabia for crude oil. China’s efforts to enhance domestic production and diversify import sources reflect its efforts to reduce its dependence on specific suppliers, particularly the US.
At the same time, the tariff war has led to changes in the mix of China’s energy imports. China’s approach also reflects a focus on energy security and reducing vulnerability to geopolitical tensions. Traditional suppliers such as Saudi Arabia and emerging players such as Russia, Brazil, and Malaysia have benefited from China’s reduced dependence on US energy imports. For example, the Power of Siberia natural gas pipeline and Russian gas projects have strengthened the country’s role in China’s energy supply.
China has also increased its domestic production and diversified imports to bolster its energy security. This strategic shift reflects China’s concerns about dependence on foreign sources, particularly the US, and is likely to have long-term impacts on global energy markets.
The trade war has also led to a shift in oil markets, with the US exporting more oil to Europe and other Asian markets rather than to China. West Texas Intermediate (WTI) has been hit hard by the trade tensions between the US and China and changes in energy demand. In addition, China’s decision to impose tariffs on US gas is creating uncertainty in an industry that will play a vital role as part of America’s global energy dominance.
Future Outlook
Trade wars lower oil prices through several interconnected mechanisms. First, they reduce overall economic activity and industrial production. When countries impose tariffs on each other’s goods, factory output typically declines because export markets shrink, which directly reduces energy consumption in factories and manufacturing plants.
Accordingly, the International Energy Agency (IEA) has estimated a significant decline in global oil demand since January 2025, with a decline of about 2.4 mb/d, almost 60% of which is due to a decline in industrial activity in China. Higher US tariffs on China have created uncertainty in the market and may delay global growth, raising concerns for oil demand.
However, the long-term effects of the tariff war depend on whether the tensions continue. Here are a few scenarios:
1. Resolution scenario: Improved relations could open up opportunities for renewed cooperation in LNG and crude oil exports, although rebuilding trust will take time.
2. Continuation scenario: Continued tensions could perpetuate current changes in supply chains and strengthen the dominance of alternative suppliers in China’s energy market.
Regardless of how China and the US approach each other in the future, the tariff war has already caused structural changes in global energy trade patterns. For example, the tariff war has led to the creation of regional supply chains in which countries rely on flexibility and diversification rather than reliance on a single supplier. This trend may lead to fragmented global energy trade structures.
Therefore, the above trend has not only affected energy security but also changed supply chains and capital flows. These changes are likely to have lasting effects on the global energy landscape, regardless of how the current trade dispute is resolved.
Shuaib Bahman
Intl. Affairs Analyst
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