By Anna Hirtenstein
(Reuters) – Oil prices plunged on Friday to the lowest level since 2021 and commodities including natural gas and soybeans also dived as China retaliated against U.S. President Donald Trump’s aggressive tariffs.
Beijing put forward a 34% additional levy on all U.S. goods, hitting back after Trump announced a 10% minimum tariff on most U.S. imports, with significantly higher duties for dozens of countries including China.
“This is the first very explicit escalation from China, they are not backing down, they are upping the game,” said Bjarne Schieldrop, chief commodities analyst at SEB. He is expecting further retaliation from Trump.
The accelerating tensions further drove fears that the tariffs could lead to a global trade war, weighing on economic growth and curbing demand for key commodities. The levies by the U.S. excluded energy, but the retaliatory move by China encompass all U.S. goods, as well as export curbs on some rare earths.
The U.S. is a major energy exporter and sells oil and LNG to China, according to data from Kpler and the EIA.
Wall Street benchmarks sold off heavily, with the Dow Jones set to reach a correction while the Nasdaq was on track to enter a bear market.
Brent futures fell $5.29, or 7.5%, to $64.85 a barrel and U.S. West Texas Intermediate crude futures lost $5.57, or 8.3%, to $61.83 a barrel. The oil benchmarks were set for the lowest close since the middle of the pandemic in April 2021.
Natural gas prices in Europe and Asia also took a tumble. European gas prices to plunged their lowest in over six months, with the Dutch front-month contract down 3.02 euros, or 7.7% at 36.45 euros per megawatt hour (MWh) or $11.78/mmBtu, LSEG data showed. Asian spot liquefied natural gas (LNG) prices also remained at their lowest level in nearly six months.
SOYBEANS, GRAINS
Soybean futures on the Chicago Board of Trade fell more than 2% on Friday which China’s tariffs on U.S. goods expected to bring trade in the oilseed between the countries to a halt. China is the largest buyer of U.S. soybeans. CBOT soybeans were down 2.3% at $9.88 a bushel at 1304 GMT after slumping to a more than three-month low of $9.84. Grain prices also fell with CBOT wheat down 1.9% at $5.26 a bushel while corn shed 1% to $4.52-3/4 a bushel.
“China’s tariffs will stop soybean and grain sales to China. There will no sales of any U.S. grains or soybeans to China until this is resolved,” one European trader said.
Demand for U.S. agricultural products has already come under pressure from the trade war during Trump’s first term in 2018. Beijing raised duties last month on $21 billion worth of U.S. products in response to Washington’s earlier round of tariffs on Chinese goods.
(Reporting by Anna Hirtenstein; editing by David Evans)
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