With Trump administration is now charging 125 per cent import tariff on Chinese used cooking oil (UCO) from this month. Shipments to the U.S., valued at $1.1 billion last year (C$1.52 billion), are tumbling with the last cargoes sailing around late March and early April before trade grinds to a halt, said three China-based UCO traders.

China’s UCO exports hit an all-time high last year at nearly 3 million metric tons or worth $2.64 billion, according to Chinese customs.

“For the time being, arbitrage to the U.S. is closed and we think it will remain so for the medium term,” said Richard Dickinson, Shanghai-based head of trading Amarus Trading, one of the largest dealers of Chinese UCO.

“Some of the exports will be diverted to Europe and new markets in Asia such as Korea, Thailand, Malaysia and India.”

At least four new Sustainable Aviation Fuel facilities, which use UCO as an ingredient and totalling at least 700,000 metric tons per year of production capacity, have started up or will begin operation by this year in Thailand, Malaysia and Japan, according to industry insiders.

Exports to the U.S. have fallen since last December as Beijing removed tax rebates for UCO exports and also due to the new U.S. clean fuel tax policy that discourages the use of imported UCO, and the latest tariffs only exacerbates the situation, a shipper of the fuel said.

The European Union, which mandated a two per cent SAF use this year, is likely to become the top destination for at least half of China’s UCO shipments in the coming months, the traders said.

China demand up

Chinese UCO exports is expected to fall this year as demand from its nascent SAF sector rises, traders and biofuel industry officials.

Dickinson and another Beijing-based senior biofuel trader estimated China’s UCO exports to ease to 150,000 to 200,000 tons each month from April onward, 20-40 per cent below the average monthly shipments in 2024.

The other sources declined to be named as they are not authorized to speak to the media.

New SAF plants such as Zhejiang Jiaao Enprotech launched late 2024 and several other plants starting or slated for start-up in the coming few months – owned by Haixin Energy Technology, Haike Chemical in Shandong and Blue Whale Bioenergy in Zhejiang – are set to become new UCO users, according to industry sources familiar with these plants.

Chinese SAF producers are using 100,000 to 120,000 tons of UCO a month currently, a volume set to climb as new plants begin operations, according to industry estimates.

China began a pilot scheme last September of SAF use at four domestic airports in Beijing, Chengdu, Zhengzhou and Ningbo.

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Business groups said China has allowed some U.S.-made pharmaceuticals to enter the country without paying the 125 per cent duties that Beijing imposed earlier this month in response to Trump’s 145 per cent tariffs on U.S. imports.

Also, a list of 131 product categories said to be under consideration for exemptions was circulating among some businesses and trade groups. Reuters could not verify the list, which includes vaccines, chemicals and jet engines, and China has not yet communicated publicly on the issue.

Signs of de-escalation

Trump’s administration has in recent days signaled it is looking to de-escalate the confrontation between the world’s two largest economies, and Trump himself told TIME magazine that talks were taking place and that Chinese President Xi Jinping had called him.

“I don’t think it’s a sign of weakness on his behalf,” he said.

China denied that discussions were happening.

“China and the U.S. are NOT having any consultation or negotiation on #tariffs. The U.S. should stop creating confusion,” the Chinese Embassy in Washington wrote on social media.

In addition to the steep tariffs on China, Trump has announced targeted tariffs on dozens of other countries, which he has suspended until July 9. That has set off a scramble among U.S. trading partners to strike individual trade deals with Washington before the deadline — a tall order, given that past trade deals have typically taken years to negotiate.

Close to a deal with Japan, Trump says

Trump told reporters at the White House that he was very close to a deal with Japan. That is seen by analysts as a “test case” for other bilateral trade agreements, though talks could be difficult. Some expect Prime Minister Shigeru Ishiba and Trump to announce a pact when they meet at the G7 summit in Canada in June.

Trump separately told TIME that he had made “200 deals” that would be completed within three to four weeks, though he declined to provide specifics. He said he would consider it a “total victory” if tariffs were still 20 per cent to 50 per cent a year from now.

The office of the U.S. Trade Representative said it had held a productive meeting with South Korea on Friday.

Trump has argued that his thicket of trade barriers will revive U.S. manufacturing industries that have been hollowed out by global competition. Economists, however, broadly warn that they would lead to higher prices for U.S. consumers and increase the risk of recession.

In addition to the country-specific tariffs, Trump has also imposed a blanket 10 per cent tariff on all other U.S. imports and higher duties on steel, aluminum and autos. He has also floated additional industry-specific levies on pharmaceuticals and semiconductors.

European and Asian stocks headed for a second straight week of gains on Friday and the dollar eyed its first weekly rise in more than a month, as investors took comfort from signs the U.S. and China were prepared to pull back from their trade war. Wall Street’s main indexes opened slightly lower.

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