Beijing may have to choose between giving up on its closest ally in the Americas or being hit with additional US tariffs, analysts said
US President Donald Trump’s latest executive order enabling the United States to impose tariffs on any country that imports oil from Venezuela poses a dilemma for China, analysts said.
China now faces a tough decision: either renounce Venezuelan oil – dealing a heavy blow to its closest ally in the Americas – or face additional duties on all Chinese exports to the US.
But some believe Beijing may view the US move as a gambit aimed at gaining an edge in negotiations over a wider deal.
China is uniquely exposed to Trump’s executive order, signed on Monday, which gives Washington the option to impose tariffs of up to 25 per cent on any country that imports Venezuelan oil from as early as April 2.
The world’s second-largest economy bought 68 per cent of the oil exported by Venezuela in 2023, according to US Energy Information Administration data, and Trump has already raised tariffs on Chinese imports by 20 per cent since returning to office in January.
Although China could replace the deliveries from Venezuela – which are estimated to make up less than 1 per cent of its total oil imports in volume terms – giving up on the impoverished, left-leaning South American country would soil a strong diplomatic relationship, analysts said.
Venezuela earned US$1.05 billion from oil shipped to China last year, according to an estimate by the Dutch financial services corporation ING.
Beijing may also be reluctant to scrap Venezuelan oil deliveries as it would look like a capitulation to US pressure, analysts said.
“China will definitely come back with a response,” said Zhao Xijun, a professor of finance at Renmin University of China in Beijing. “It has its own interests and it’s not going to do this just because the US says so.”
China’s foreign ministry on Tuesday called on Washington to rescind its “illicit unilateral sanctions” on Venezuela and “do more things that are conducive to peace, stability and development of countries including Venezuela”.
Venezuela has been China’s strongest ally in the Americas since 2000, with China extending loans of more than US$40 billion to the country, according to a 2024 study by Pepperdine University in California.
China has defended the government of President Nicolas Maduro despite international criticism, the study added, and helped it through financial crises that still linger.
But any further US tariff hike would deal another blow to Chinese exporters of manufactured goods, a key driver of China’s economic growth, analysts said.
The 20 per cent additional tariffs Trump has already imposed on Chinese goods are expected to reduce China’s gross domestic product (GDP) growth by 0.6 percentage points this year, Morgan Stanley said on Monday.
“I think this is making leaders in Beijing have a tough time,” said Chen Zhiwu, a chair professor of finance at the University of Hong Kong.
Trump’s order said that Maduro’s actions and policies “pose an unusual and extraordinary threat” to US national security, while the Venezuela-based “terrorist” group Tren de Aragua had “intensified this threat”.
The tariffs on countries importing Venezuelan oil would be added to any other duties already in place, the order said. It added that if mainland China got hit with tariffs, Hong Kong and Macau would face the same levies “as a measure to reduce the risk of transshipment and evasion”.
But duties against China over Venezuelan oil would only be imposed at the “discretion” of the US secretary of state, the executive order stated.
Trump may back down before April 2 or hope that Venezuelan oil tariffs reach the negotiation table whenever US and Chinese leaders meet, some experts believe.
Tariffs over Venezuelan oil will become “one of many negotiation topics”, Zhao said.
The US leader said on Monday that he may exempt some countries from reciprocal tariffs due to take effect in April.
“While further tariffs from the US certainly would represent a stronger headwind, there’s a high level of uncertainty on how high tariffs will go, how long they will last, and who ultimately will end up shouldering the burden,” said Lynn Song, ING’s chief economist for Greater China.
