Which is More Impactful to the US: Crude Oil or China Trade? Can Someone Tell Currency Traders?

Talk of a trade war with China has recently dominated the discussion in financial markets, overshadowing the other major story playing out in the US economy—normalization of the energy markets. I thought I would answer the question of whether trade with China or oil was a bigger economic issue.

Currently the US consumes about 20.4M barrels oil per day. This works out to about $500B on an annualized basis if we use the current price of WTI ($65/barrel) multiplied by 365 days.

Using the most recent monthly trade figures, the 12-month sum of the US trade deficit with China is $388B. In the chart below, I compared the two series over the last decade.

For about a month in early 2016, the size of the US trade deficit with China was larger than US crude oil consumption, but as of today, US crude consumption on annual basis is about 25% larger than the trade deficit with China.

We shouldn’t forget that the US has about 1.2M barrels of crude and refined product held in inventory.