Escalating Tariffs Trigger Oil Price Collapse: A Looming Trade War

Oil prices have plunged to their lowest levels since 2021 as China retaliated against aggressive U.S. tariffs. President Trump's tariff escalation has sparked fears of a global trade war, impacting commodities like natural gas and soybeans. China's countermeasures include higher tariffs on U.S. goods.

Oil prices took a nosedive on Friday, hitting their lowest levels since 2021, as China hit back at U.S. President Donald Trump's aggressive tariff increases. The diplomatic spat has extended beyond oil, causing a sharp decline in other commodities like natural gas and soybeans.

In an explicit escalation, Beijing has imposed a 34% additional levy on all U.S. goods, responding to Trump's earlier announcement of a 10% minimum tariff on most U.S. imports, and even higher duties for several nations, including China. Bjarne Schieldrop, chief commodities analyst at SEB, anticipates further countermeasures from the U.S.

The rising tension is stoking fears of a global trade war, threatening economic growth and curbing the demand for key commodities. While energy was initially excluded by U.S. tariffs, China's retaliation encompasses all U.S. goods. Wall Street markets have reacted, with the Dow Jones nearing a correction and the Nasdaq on a bear market trajectory.

(With inputs from agencies.)