Chinese Tariffs Unlikely To Hurt US Energy: 4 Top Picks

The U.S. energy sector has been burgeoning lately. With rising oil prices and consistent efforts by the government to keep production high, gains for the space have been abundant. Experts are of the view that China’s tariffs on its natural gas imports from America will end up harming the world’s second largest economy more.

Moreover, energy production in the United States is expected to breach new records in the third quarter. Notably, the Energy Select Sector SPDR ETF (XLE) has gained 1.2% in the past 30 days. Under such encouraging conditions, investing in stocks from the space seems prudent.

Tariffs on U.S. Energy to Hurt China More

On Sept. 21, China imposed a 10% tariff on natural gas imports from the United States in a bid to hurt the U.S. energy sector. This came right after the Trump administration slapped tariffs of 10% on an additional $200 billion worth of Chinese goods.

On the face of it, the tariffs might seem disruptive to the growth of the U.S. energy sector. However, the fact that the current 10% level would be increased to 25% from Jan. 1, 2019 will lead companies in the United States to look for alternatives. Further, America does not export much to China because of the huge U.S.-China trade deficit.

Consequently, China stands to lose if it chooses to impose retaliatory tariffs on goods sourced from America. Further, economists opine that these tariffs could also cost the Asian giant about 0.6% of its GDP.

U.S. Energy Production to Hit Record High in Q3

Per the latest report by the American Petroleum Institute on Sep 24, third-quarter outlook for the U.S. energy industry appears encouraging. The report debunks claims that energy sector in America is likely to be hurt by trade war woes. It throws light on a very important fact that the country’s overall petroleum trade balance increased an impressive 56% in the last two months. The metric surged to 4.54 million barrels per day (MBD) in August from 2.9 MBD in June.