US-China Phase One Trade Deal Reaction
77彩票注册官网Mike Sommers, the president and CEO of the American Petroleum Institute, has described the phase one trade deal reached between the United States and China as “a positive step forward” but highlighted that “there’s more work to be done”.
“We encourage the administration to stay at the negotiating table until the U.S.-China marketplace for energy trade is fully restored and all remaining tariffs are lifted,” Sommers stated.
77彩票注册官网“Including U.S. tariffs on imports of industrial components used in our industry and Chinese retaliatory tariffs on U.S. energy exports,” he added.
77彩票注册官网Kerstin Braun, president of Stenn Group, an international provider of trade finance, said the deal is “long-awaited good news for global trade” but added that it fails to cover “the significant issues that prompted the war in the first place”.
“This includes China’s preferential support of state-owned enterprises and technology transfer from American companies doing business there,” Braun stated.
77彩票注册官网“Both sides need to accept the larger picture. For the U.S., it’s that China as an economic power is not going away. For China, it’s that to be in the world marketplace means complying with international business standards,” Braun added.
77彩票注册官网“With a weakened World Trade Organisation and the general trend away from multilateral trade agreements, we’re only going to see more trade squabbles,” Braun continued.
China’s Agreement to Increase Energy Imports
77彩票注册官网Commenting on the phase one trade deal, Wood Mackenzie Asia Pacific Vice Chair Gavin Thompson said, “from an energy perspective, what is most notable is China’s agreement to increase energy imports from the U.S. by up to $52.4 billion over the next two years”.
Thompson emphasized that $52.4 billion over two years is “a lot” of energy but highlighted that it is going to be “challenging” for China to massively increase imports of oil and LNG from the U.S. while tariffs remain in place.
"Consider LNG. In 2017, China imports from U.S. were approximately 1.5 Mt, worth around $0.6 billion. If China is to increase the value of U.S. LNG imports considerably as a part of this agreement, let’s say to around 10 Mt in 2021, then the 25 percent tariff would need to be either absorbed by the importing company, or passed through to the consumer,” Thompson stated.
“We expect that Chinese national oil companies will be reluctant to commit to large-scale purchases given this. At the same time, the next two years will also see a slower pace of gas demand growth in China, rising domestic production, and the arrival of Russian pipeline gas, creating a more competitive gas market,” he added.
Thompson went on to say that the Chinese uncontracted LNG demand is estimated to be 17 Mt in 2020 and 23 Mt in 2021. He stated that U.S. off-takers will now be looking to target this market.
"Contract and portfolio suppliers with contracted supply into China and U.S. offtake – notably Shell, BP and Cheniere – could also target increasing volumes of U.S. LNG within existing contracts into China if agreement can be reached with key buyers, including CNOOC and PetroChina,” Thompson added.
Trade Deal Signed
The U.S. and China signed the phase one trade agreement on Wednesday, with U.S. President Donald Trump labelling the event as a “very important and remarkable occasion”.
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