Trade war watchers got mixed signals again last week as U.S. politics muddied the potential for a trade deal.
After Congress and President Trump passed a near-unanimous critique of China’s handling of Hong Kong’s democracy protests, China condemned U.S. intervention in Chinese domestic politics, which threatened to overshadow trade focus.
Since then, a new bill was passed by the U.S. House of Representatives, issuing fresh sanctions against China’s government and its political leaders. The Uighur Act was passed in response to China’s treatment of the Uighur Muslim minority group in northwest China. According to the United Nations, the population is under strict surveillance and over a million Uighurs have been detained. If the Senate and President Trump support the House’s measure, Chinese retribution could be fierce.
Despite these concerns, China made trade-friendly overtures, dropping retaliatory tariffs on U.S. soybeans, sorghum, cotton, and pork. This would allow for more Chinese imports of U.S. commodities, something China desperately needs as food inflation is rampant there.
Markets reacted tepidly, climbing modestly. As of midday Friday, January soybean futures sold for $8.88 per bushel, March cotton changed hands at 65.5 cents per pound, and February hogs fetched 68 cents per pound.
U.S. energy boom spills abroad
In 2005, U.S. dependence on foreign oil hit its peak, when the United States imported over 14 million barrels per day of foreign oil and petroleum products, like diesel fuel and gasoline.
Recently, that figure flipped upside down, with the United States becoming a net exporter of oil and petroleum products, selling an average of 89,000 barrels per day to foreign countries during the month of September.
This shift represents a massive change in the oil market, driven primarily by a rapid increase in U.S. oil production, which more than doubled during that period. U.S. oil drillers benefitted from technologies that allowed them to tap into new oil sources, and are now able to sell the fuel abroad, thanks to a 2015 law allowing U.S. oil exports.
For Americans, these changes have largely been beneficial, as the United States is far less dependent on foreign countries for its energy supply, although U.S. prices still track the global market.
Last week, for example, saw crude oil rally on reports that Iraq was pushing to reduce OPEC oil output, driving January crude oil futures to nearly $60 per barrel, a ten-week high.