Despite Trump, China still has a big thirst for Gulf oil

President Trump’s tariff wars threaten to hollow out the dollar, crash the T-bill market and drive corporate earnings – and therefore equities – off a cliff.

All this is bad enough for business and investors in the Arabian Gulf, but the immediate questions in this region are: what will the chaos coming from the US do for the oil price – still the life-blood of regional economies – and how will it affect China, the number one destination for Gulf hydrocarbons?

At first glance, it seems like bad news for energy bulls: escalating tariffs between Washington and Beijing threaten to hit China’s manufacturing exports, long a driver of the country’s thirst for oil and gas.

Trump’s “liberation day” has ratcheted into successive rounds of aggressive tariffs on Chinese goods, with levies now reaching up to 145 percent. Beijing has responded in kind, including placing retaliatory duties on many American products, including LNG, coal and crude.

But from a global demand perspective, China is not backing down. In fact it is doubling down on stimulus.

Beijing has unveiled plans to issue a record $411 billion in special treasury bonds in 2025, aimed at revving up consumption and industrial activity. The funds will go toward consumer subsidies, high-end manufacturing and infrastructure – including renewable energy.

GDP growth in 2024 came in at 5 percent, with export volumes still strong outside the US corridor. That is not the profile of a country heading into economic hibernation.

And China can find other places to deploy its manufacturing muscle. Southeast Asia, Africa and parts of Europe are buying Chinese-made goods in rising volumes.

China’s exports of solar panels for instance hit record highs last year, with demand from developing markets driving the charge. Even without the US, China’s factory floors will be far from idle.

Further, the country’s energy mix is undergoing a structural shift, not a decline. First-quarter data from 2025 shows clean electricity generation up 19 percent year-on-year, with solar and wind leading the way.

That is good news for climate goals – but does not mean lower energy use. If anything, Chinese electricity consumption is rising, powered by both industrial growth and an expanding digital economy.

Fossil fuels remain a backbone of Chinese energy consumption – and here the Middle East is stepping into the void left by US sanctions and tariffs. China’s oil and gas companies are actively locking in new supply deals across the Gulf.

In one recent example, China National Offshore Oil Corporation signed a five-year LNG deal with the UAE’s Adnoc, due to begin deliveries in 2026. Saudi Aramco has also doubled down on its China partnership by offering oil at four-year record low prices in official selling prices to Asian customers.

These are clear signals that Gulf suppliers are taking immediate advantage of Washington’s hardline trade posture.

This is against a background of rapidly changing patterns of Chinese energy demand. Its championing of electric vehicles is moving faster than expected, and is undoubtedly taking a bite out of refined product imports – but not enough to cause alarm.

The industrial engine of China still runs on hydrocarbons and the transport sector, including aviation and heavy freight, continues to guzzle fuel.

In this context, the US ban on hydrocarbon products to Chinese independent refineries – the so-called “teapots” – is virtually meaningless.

For oil and gas producers in Saudi Arabia, the UAE and Qatar, China remains the main prize. A pivot away from the US presents the Gulf states with a rare window to strengthen long-term energy partnerships with Beijing.

As the geopolitical rivalry between Washington and Beijing deepens, energy flows are shifting with it and the Gulf is adjusting accordingly.

The point is this: while China may sell fewer widgets to the US it will not be consuming less energy any time soon. The country is retooling its economy, reshaping its trade networks and recalibrating its energy inputs – but the net effect is continued and growing demand.

So the assumption that a slowdown in US-China trade will automatically dampen global energy demand may not hold. Because of all the other variables in the geo-economic equation – principally Iran and Russia – this does not automatically translate into a rising oil price, as the recent volatility of crude has shown.

But at least one variable looks less ominous than we may have imagined. China’s economic engine is changing gears, not stalling – and it still has a great thirst for Gulf fuel.

Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia

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