China said it will impose a 15% tariff on imports of U.S. coal and natural gas in a move that has once again increased the temperature of tensions between the world’s two largest economies. The move comes directly in response to the previous administration of the United States. President Donald Trump, who had been imposing tariffs on Chinese goods on the pretext of redressing issues of trade balances and intellectual properties. China putting duties on imports of coal and natural gas portray the politicization of this entire trade relationship while still showing off the geopolitical as well as economical competition between two nations.
The United States-China trade war accelerated much more vitally from 2018 because the administration under President Donald Trump agreed to have a series of tariffs on various Chinese products and imports, leveling accusations against the country regarding practices like unfair trading, theft of intellectual property rights, and certain barriers in markets. There was some level of agreement and negotiation in the process, in which a trade deal was one of them. It was signed in Phase One during early January of this year 2020; however, all this did not ease the tensions.
It was at this time that the two sides knocked sectors very pivotal to the economic systems of the two nations. Not limited to consumer goods, it touched sectors of steel, aluminum, and even energy. Of course, for some time now, the U.S. side had been seeking to target certain energy sectors-in particular, coal and liquefied natural gas (LNG). In this event, the 15% tariff imposed by China on imports of U.S. coal and gas is not only a knee-jerk response but a tool that China has been using as part of her economic policy in addressing the interests of her nation and in safeguarding her own domestic industries.
Effects on US Energy Export
China has placed a 15% tariff on exporting U.S. coal and natural gas, which might soon become too cost-prohibitive for the U.S. energy industry. China has now become a very important customer to the energy products of the U.S. including coal and LNG. For example, Chinese U.S. coal from Wyoming and West Virginia has been the primary export to provide for its energy needs though still push towards cleaner sources of energy. Similarly, U.S. LNG has incrementally been in demand by China chiefly because it fits within China’s growing demand for natural gas which was birthed from environmental concerns which their homegrown coal-fired electricity generation has wrought.
However, the Chinese tariff would raise the price and, thus the price of US exports compared to alternatives. While China has been diversifying its coal and natural gas sources for some time, tariffs can go as low as dragging U.S. energy exports down-and these would certainly hurt American coal producers and LNG exporters. More importantly, the U.S. energy sector was hoping that China, in anticipation of the trade deal negotiations, committed to buying more of American energy products, but this new tariff reminds everybody that China is not afraid to use tariffs as a bargaining chip.
Economic and Political Strategy of China
China is playing not only the economics game but also the political game. China is openly demonstrating the U.S. just how it may stand its ground in trade. The tariffs come as one move to redress what is described to be the ‘protectionism’ advocated and implemented by Trump’s administration-who, amid his drive toward the reduction in the U.S. trade deficit with China-reduced the very ascension to global economic supremacy.
Aft Economically direct aside, this is still also another geopolitical dimension at play here. It is a struggle for influence over the two nations in the world stage, especially in trade, technology, and political influence. Energy import tariffs would be an indication that China will not hesitate to employ economics as their tool in questioning U.S. supremacy over the global market and finding a more favorable balance of trade. It’s sending a message that China has choices and cannot be bought off because the U.S. wants it to.
Global Reach into the Energy Market
Geopolitics has some hold on the global energy market. As a matter of fact, the trade war between the U.S. and China has already been felt far and wide. If, in fact it will leave behind American coal and natural gas for energy, the implications for a world supply chain and energy pricing are immense; it would likely lead other nations to rethink the energy import strategy while providing open-ended market opportunities to producers abroad. Australia, Russia, and Canada will capitalize on the change in Chinese demand; U.S. exporters will lose market for their products.
It will also imply long-term change in the transition of global energy. Because it relies on alternative energies, such as solar and wind, China’s future demand for coal and natural gas may decline. You can also read about, China’s Mega Nuclear Facility Revealed: Why India Should Be Worried Whether the U.S. energy sector would eventually feel the pinch depends on how China balances its energy mix and its ability to diversify out of fossil fuels.
Conclusion
Such actions would definitely throw off the global trade and energy markets as both continue to struggle to be at the top in matters of the economic world. When China levied a 15% tariff against imports of US coal and natural gas, then that’s probably the point of indication that the trade war between these two wasn’t too close to an ending battle. Whether these tariffs are a negotiating ploy or evidence of more fundamental economic disengagement will be the ultimate indicator of what lies ahead for the U.S.-China trade relationship and the global energy market.
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