Trade relations between the US and China improved this weekend.

The Trump administration made meaningful actions to put the looming trade war with China on hold after Treasury Secretary Steven T. Mnuchin said they would refrain from implementing significant tariffs on various Chinese goods.

In a joint statement on May 19, China agreed to purchase increased amounts of U.S. goods, including agriculture, energy, and manufactured goods. However, China has not formally released a quantitative figure committing to the amount they will purchase, and when.

The announcement comes after President Trump announced tariffs of $150 billion on Chinese goods, including an initial $50 billion set to take effect in the coming weeks. China retaliated with tariffs of an equal scale, all of which has been in stalemate and a state of uncertainty over the past month.

The U.S. – China trade deficit reached $337 billion last year, by far the largest of any country.

These announcements come through a mix of the joint statement, statements by Treasury Secretary Mnuchin, and President Trump’s personal Twitter account.

President Trump is scheduled to meet with North Korean ruler Kim Jong Un in Singapore in early June, and the trade talks with China may be a precursor to assistance soliciting North Korea to give up their nuclear arsenal.

It is unforeseen and unpredictable what may happen with the U.S. and China trade relationship, and tariffs may likely not be entirely off the table. However, the recent news and announcements appear to be a sign toward deescalating potential trade war concerns and economic stability between nations.

Resources:

http://www.latimes.com/business/la-fi-china-us-trade-war-on-hold-20180520-story.html
https://www.cbsnews.com/news/trump-says-barriers-and-tariffs-with-china-are-coming-down/

China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!

— Donald J. Trump (@realDonaldTrump) May 21, 2018

https://abcnews.go.com/Politics/wireStory/us-china-beijing-commits-buying-american-goods-55297175

In early January 2018, oil prices hit their highest levels in more than three years. “U.S. crude oil inventories are at their lowest level since August 2015. OPEC is getting closer to its target of reducing OECD industrial stocks to the five-year average,” says PVM Oil Associates analyst Tamas Varga.

Data from the U.S. Energy Information Administration showed that crude inventories fell by almost 5 million barrels to 419.5 million barrels in the week of January 5, 2018. This drop is likely due to the extreme cold weather that stopped some onshore output in North America, which was expected to be short-lived. Production cuts led by OPEC and Russia that started in January 2017, and are set to continue throughout 2018, have underpinned charges. There is still downward pressure in the physical market, where the second and third largest OPEC producers have cut their prices to remain competitive.

The oil price decline that began mid-2014, when the price of oil was consistently over $110/bbl, has changed the fundamental economics of the global chemicals industry, and has brought about widespread uncertainty. Additional supply from North American shale oil and continued high production levels from OPEC are likely to make a slow but steady recovery.

Nonetheless, prices will need to recover over time to permit investment in production and exploration. Over the past ten years, oil prices have gone through at least two complete cycles, and more significant swings are likely to happen. During this time of ever-changing prices, setting short and mid-term plans will continue to be necessary.

Oil is one of the key ingredients in the manufacture of various chemicals and related products. Consequently, many chemical firms benefit from lower crude oil prices. However, companies using natural gas as opposed to oil for their feedstock do not enjoy those benefits, resulting in the cost of natural gas affecting chemical firms more than the price of oil in those cases.

Additionally, a substantial decline in crude oil prices would impact the market in other ways. It makes the economics of petroleum substitutes a great deal less attractive, including bio-based and battery chemicals. This issue is causing companies, from global powerhouses to niche firms, to reevaluate their strategies.

Sources:
https://www.cnbc.com/2018/01/10/oil-markets-near-3-year-highs-on-tighter-us-market.html
https://www.icis.com/resources/news/2018/04/10/10210537/us-on-pace-for-record-oil-natgas-production-in-2018/