Publications: Notes at the Margin

The Trade War: A Seemingly Silent Chinese Strategy on Oil (May 28, 2019)

 

On the surface, it appears that Donald Trump and China’s president Xi Jinping have nothing in common. Trump has embarked on a trade war with China, aiming to force it into servitude to the United States. President Xi has fought back. Over history, China has had to bend to the will of nations such as Britain and Japan. Today, its clear goal is to dominate the world economy. To achieve this, it will almost certainly not cooperate or kowtow as it has in the past. That said, Trump and Xi do share one thing: a desire for low oil prices. Trump sees low oil prices as a way to keep his political base quiet and supportive. Xi likely views low prices as a key element in boosting Chinese exports to the world’s less-developed countries.

 

Both President Trump and President Xi have acted to address their vulnerability to higher oil prices. Trump has posted thinly veiled threats to oil producers on Twitter. President Xi has led an effort to accumulate more than six hundred million barrels of oil that can be used to moderate prices. Indeed, China is already pushing these strategic stocks onto the market to accomplish this.

 

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