Fresh US Tariffs on Chinese Goods Could Push Beijing to Buy Iranian Oil

The latest round of US tariffs on China could push Beijing to buy Iranian oil as a retaliationf, Bank Of America Merill Lynch announced.

“Global oil consumption growth is running at the weakest levels in nearly a decade ... Protectionism has taken a big toll on global industrial activity. We estimate that the latest round of US tariffs on China could weaken global oil demand by an additional 250 to 500 thousand barrels per day,” BofA analysts said in a note.

Also, a decision by China to reinitiate Iran crude purchases could send oil prices into a tailspin, the bank added.

“In the extreme, a combination of weaker demand and the return of up to 1.5 million bpd of Iran oil would weaken our balances by up to 2 million bpd,” BofA announced.

Oil prices regained ground on Friday with an average 2% rise after their biggest fall in over three years, following US President Donald Trump’s threat of another tariff hike on Chinese imports.

Brent futures gained $1.50, or 2.5%, rising to $62 a barrel by Friday morning, while US West Texas Intermediate (WTI) futures rose $1.07, or 2%, to $55.02 a barrel.

Trump recently warned that China will get “a much tougher” agreement if Beijing keeps stalling the talks until the 2020 presidential election in the US.

China announced on Friday that the country would have to take countermeasures if the United States was committed to imposing more tariffs on Chinese goods.

The foreign ministry’s spokesperson Hua Chunying was quoted by Reuters as saying that the US – the world’s largest economy – should give up its illusions, shoulder some responsibility and get back on the right track to resolve the trade war.

She added that, while China does not want a trade war with the US, it is not afraid of fighting one.

The Chinese Foreign Minister, Wang Yi, also stated on Friday that tariffs are "not a constructive" way to solve the US trade war, AFP reported.

"Slapping on tariffs is definitely not a constructive way to resolve economic and trade frictions, it's not the correct way", Wang noted.

The trade war between the world’s two largest economies broke out last year, when Trump slapped 25 percent tariffs on $50 billion worth of Chinese products. Beijing retaliated in kind, with both sides exchanging several rounds of tit-for-tat levies. In June, the US raised tariffs on $250 billion worth of Chinese goods to 25 percent, with China retaliating by targeting 5,000 US-made products worth $60 billion. Washington and Beijing agreed to put tariff hikes on hold after Trump’s talks with Chinese leader Xi Jinping at the G20 summit in June, but that 'truce' appears to have now come to an end.