Oil prices hit pandemic lows; metals, soybeans drop as China retaliates

LONDON/CHICAGO: Oil prices plunged nearly 8 per cent on Friday to the lowest level since 2021, while copper, soybeans and other commodities also fell as China retaliated against US President Donald Trump’s aggressive tariffs.

Safe-haven gold was down for a second day, swept up in a broader market sell-off as major equities indexes plunged and recession fears swelled.

Read more: Crude oil prices decline amid tariffs, OPEC production increase

Beijing put forward a 34 per cent additional levy on all US goods, hitting back after Trump announced a 10 per cent minimum tariff on most US imports, with significantly higher duties for dozens of countries including China.

“This is the first very explicit escalation from China, they are not backing down, they are upping the game,” said Bjarne Schieldrop, chief commodities analyst at SEB. Schieldrop expected further retaliation from Trump, who said on Friday that China “played it wrong” and vowed not to change his policies.

The accelerating tensions further drove fears that the tariffs could lead to a global trade war, weighing on economic growth and curbing demand for key commodities. The levies by the US excluded energy, but the retaliatory move by China encompasses all US goods, as well as export curbs on some rare earths.

The US is a major energy exporter and sells oil and LNG to China, according to data from analytics firm Kpler and the US Energy Information Administration.

Wall Street benchmarks sold off heavily, with the Dow Jones set to reach a correction while the Nasdaq was on track to enter a bear market.

Brent futures dived $4.53, or 6.46 per cent, to $65.63 a barrel by 2:41 pm local time. US West Texas Intermediate crude futures were down $4.93, or 7.36 per cent, to $62.02. The oil benchmarks were set for the lowest close since the middle of the COVID-19 pandemic in April 2021.

Soybean futures on the Chicago Board of Trade fell more than 3 per cent on Friday as China’s tariffs on US goods were expected to bring trade in the oilseed between the countries to a halt. China, the largest soybean buyer, was seen accelerating purchases from rival supplier Brazil soybeans ended down 3.4 per cent at $9.77 a bushel, the lowest since late December.

CBOT wheat fell 1.3 per cent to $5.29 a bushel while corn bucked the broader weakness to close up 0.6 per cent at $4.60-1/4 a bushel as top importer Mexico was excluded from Trump’s sweeping tariffs this week.

Demand for US agricultural products already came under pressure from a trade war during Trump’s first term in 2018. Beijing raised duties last month on $21 billion worth of US products in response to Washington’s earlier round of tariffs on Chinese goods.

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Base metals sold off, with London Metal Exchange three-month copper down 3 per cent, its biggest daily slide since the early days of the pandemic in 2020. Aluminum already subject to a 25 per cent US import tariff, was down 3 per cent at its lowest since September.