Tougher US trade policies with China and potential retaliation could renew a trade war that weighs on global trade and oil consumption: US President-elect Donald Trump’s threat of a 60% tariff on Chinese goods raises risks of a new trade war with China. The International Monetary Fund (IMF) projects that if higher tariffs affect a “sizeable swath” of world trade by mid-2025, global output could be reduced by 0.8% in 2025 and by 1.3% in 2026. A UBS economist estimates that a 60% tariff on Chinese imports would cut China’s GDP growth by 2.5 percentage points a year later. Woodmac and Goldman Sachs estimate that higher tariffs might lower global oil demand by 500,000-760,000 bpd (1/3 to 1/2 of the current projected increase for 2025) and reduce oil prices by USD5-7/bbl from the current level (November 11).

Mr. Trump’s previous energy sector policy might continue in his second term. The incoming US administration may continue promoting energy independence by increasing oil production and exports. These actions could boost global oil supply and exert downward pressure on oil prices.

We maintain our average 2024F Brent oil price assumption of USD80/bbl:  As of November 13, YTD, the average Brent oil price was USD81/bbl and Brent currently stands at USD72/bbl. These prices are broadly in line with our average full-year forecast (USD80/bbl).

Powered by Froala Editor