China’s threat of US energy tariffs is the only spot of clarity in the muddled trade war
China’s threat makes sense on two fronts: it can replace US coal, oil and gas imports, and the tariffs would hit Donald Trump’s political heartland
China’s threat to impose tariffs on US crude oil, liquefied natural gas (LNG) and coal is possibly the only sign of clear thinking in the increasingly muddled, escalating trade dispute with the Trump administration. The tariffs on energy imports were mooted by the Chinese on June 15 as part of their response to the US announcement of tariffs on $50bn worth of imports. To be clear, the tariffs on crude oil and products, LNG and coal are still in the realm of the possible, and it will probably take a further deterioration in the relationship between the world’s two largest economies to turn them into a reality. The Chinese threat to impose tariffs on energy imports makes sense from two perspectives. The first is that in economic terms it’s generally best to put tariffs on goods with high elasticity — in other words, goods you can substitute relatively easily from other suppliers. The second is that if the aim of your tariffs is to inflict sufficient pain on the other country, it’s bes...
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