But over the long term, the impact will likely become more significant. If China’s exports shrink, that will impact demand for energy. China remains heavily reliant on the US as an exports market, accounting for close to 14% of the country’s total exports in the first quarter. Some factories depend on US buyers for 70% to 80% of their export volumes, and for now, orders from the US have essentially halted, and these manufacturers are struggling to find alternative markets.
How long could the trade standoff with the US last?
From the perspective of the average person in China, there’s a strong sense that the country must stand firm. There’s a widely shared belief that compromising with the US won’t yield results and that it can’t be trusted to negotiate in good faith. The Chinese government has stated repeatedly that it will not engage until the US steps back to a previous position - essentially, until it shows willingness to level the playing field. The government has made it clear that this will be a difficult, protracted trade conflict and it is mobilizing the country to prepare for that.
Plans for more government economic stimulus?
We are expecting more, particularly in Q2. Measures may include interest rate cuts and reductions in the required reserve ratios for banks, aimed at increasing liquidity and encouraging investment. Another key focus will be supporting the factories most affected by US tariffs. The government will likely need to assist workers in cases of temporary layoffs and give these factories time to adjust, whether by shifting to domestic markets or finding new overseas buyers.
Is China starting to take less Iranian crude?
Independent refiners have become more cautious as the US has stepped up its sanctions on Iran. We saw purchases decline in April, compared to March, and we don’t expect them to rebound to the same high levels anytime soon. That said, some independent refiners will continue to take such cargoes as long as they believe it’s safe to do so.