Oil prices decline as US-China trade tensions flare

US-China tariff tensions have driven down oil prices as US President Donald Trump announced imposing a 100% tariff on Chinese imports. Meanwhile, Beijing expanded its rare-earth import controls, underscoring China’s intent to leverage supply chain dominance ahead of the 90-day truce deadline.

Rystad Energy estimates that this escalation in trade tensions could quickly set the stage for a decoupling between the two powers if the trends continue.

Here is Rystad Energy’s market update from Claudio Galimberti, chief economist and global market analysis director:

“For investors, the risk is less about the harsh diplomatic tone than the underlying strategic decoupling – the US and China are now risking a breakup, with each side trying to achieve a position of strength by threatening to inflict greater damage on the other. China’s decision to leverage rare-earth exports, an area where it still controls around 70 to 80% of global refining capacity, highlights the current strategic vulnerability of US supply chains.

Even through years of trade tension escalation, Beijing has maintained stable rare-earth flows to the US, reflecting both sides’ restraint in this crucial and sensitive sector. That restraint is now over.

China’s new minerals control list directly targets high-end magnet and chip-grade materials used in defense and electric-vehicle manufacturing, raising the risk of supply disruption if talks collapse after November. The stakes cannot be any higher.”

China accounts for around 80% of total US rare-earth imports, with Malaysia and Estonia providing most of the balance. These imports cover nearly all of US domestic consumption, as the country lacks significant refining capacity despite a minor mining output from California’s Mountain Pass operation. Market reactions were swift: US equities plunged by the end of last week and have only marginally recouped this week, Asian currencies softened, and gold surged to $4,200 per ounce – up more than 50% year to date – as investors sought a hedge against political and fiscal risk.