Detangling the tariff knot – considering what’s returning to China

Market & Trading Calls

• Trump Tariff De-Escalation: following a chaotic start to 2025, the Trump administration has eased back on tariff implementation in a bid to negotiate trade deals. This marks a clear retreat from earlier ambitions to begin taking on a highly imbalanced global trading system. It looks likely that Trump will negotiate some type of limited deal with the Chinese that involve commitments to buy a certain amount of US goods and possibly cap Renminbi strength.
• Short-Term Relief, Long-Term Risks: market sentiment and consumer confidence have rebounded, but deeper issues remain unresolved, namely widening global trade imbalances and associated wealth inequality. China, meanwhile, gains short-run flexibility to maintain its investment-led model, delaying the structural rebalancing needed to correct global trade imbalances.
• US NGLs Matter the Most: China’s temporary rollback of tariffs on US crude, LNG, coal, and grains will have a limited volumetric impact as these trade flows were already small or heading into the off-season. However, the easing of duties on US NGLS, especially ethane and propane, is critical for China’s petrochemical sector, where US supply is irreplaceable.
• Petchems and Ag Shifts: the return of US NGL exports to China is bearish for Middle Eastern LPG and naphtha but bullish for US and European LPG markets. Meanwhile, even with lower soybean tariffs, China’s record Brazilian purchases and seasonal factors limit upside for US soybeans, while Chinese demand for US corn and wheat continues to decline.