Oil prices slump to four-year lows; U.S.-China trade war escalates

Investing.com-- Oil prices slumped to four-year lows Wednesday after China announced additional tariff measures on U.S. goods, ramping up the trade war between the two largest economies in the world.

At 08:25 ET (12:25 GMT), Brent oil futures expiring in June fell 5.9% to $59.11 a barrel, while West Texas Intermediate crude futures fell 6.1% to $55.97 a barrel.

China retaliates to Trump's tariffs 

China announced earlier Wednesday that it will impose 84% tariffs on U.S. goods from Thursday, up from the previous 34%, in response to U.S. President Donald Trump signing an executive order hiking his planned tariffs on China by 50%, marking a dire escalation in tensions with the world’s biggest oil importer.

Brent and WTI have fallen for five sessions since Trump announced sweeping tariffs on most imports, prompting concerns over economic growth and demand for fuel.

Trump’s latest order had brought U.S. tariffs on China to a cumulative 104%, much higher than the 60% worst case rate threatened by Trump when he was campaigning for President. 

The tariffs are expected to dent China’s economy, potentially hurting the country’s appetite for oil imports. 

Beijing has maintained a largely harsh rhetoric against Trump’s tariffs, vowing to “fight till the end.” China is also expected to ramp up its stimulus efforts to offset the impact of Trump’s tariffs. 

But beyond China, oil markets were also on edge over the broader economic impact of Trump’s tariffs, which stand to disrupt global trade and potentially dent growth. Trump’s tariffs will be borne largely by U.S. importers, a trend that could drive up local inflation and also undermine growth.

Several investment banks, brokerages, and betting markets were seen increasing their odds for a U.S. recession in 2025. Such a scenario bodes poorly for oil demand. 

US inventories see small draw - API 

Data from the American Petroleum Institute showed a nearly 1.1 million barrel draw in U.S. inventories over the past week. The draw comes after several weeks of outsized builds in inventories - a trend that had sparked some concerns over sluggish fuel demand. 

The API data usually heralds a similar reading from official inventory data, which is due later on Wednesday. 

Oil inventories grew by a substantially bigger-than-expected 6.1 million barrels in the prior week. 

(Ambar Warrick contributed to this article.)