NEW YORK (Bloomberg) – Crude plunged to a two-week low after China announced tariffs on U.S. crude oil for the first time as the trade war between the world’s biggest economies escalated. Futures fell as much as 3.5% in New York on Friday, erasing this week’s gain. China will impose additional levies on $75 billion of U.S. goods, with tariffs of 5% on American crude. China was the ninth-largest buyer of U.S. crude during the first five months of this year. Last year, Beijing removed crude from a list of goods targeted for tariffs, signaling the importance of American oil in the global market. The decision to include it now shows how the trade spat has intensified, forcing it to use duties on the strategic commodity as ammunition. “It’s a direct strike on U.S. crude exports, which is why you are seeing this sort of out-sized reaction,” said John Kilduff, partner at New York-based Again Capital LLC. “China had been an aggressive U.S. crude buyer.” China’s announcement comes as leaders from the Group of Seven nations prepare to meet in France and central bankers gather in Jackson Hole, Wyoming, to discuss issues including fears of a global economic slowdown. New York-traded crude futures have dropped more than 7% this month as the protracted trade dispute fanned fears about stunted demand. U.S. fuel stockpiles have also increased, aggravating concerns about a potential glut. West Texas Intermediate crude for October delivery declined $1.46 to $53.89/bbl at 9:46 a.m. on the New York Mercantile Exchange, after falling to as low as $53.40/bbl. Brent for October delivery dropped $1.01 to $58.91 on the ICE Futures Europe Exchange. Its premium to WTI for the same month traded at $5.02/bbl. The Chinese tariffs will take effect in stages between Sept. 1 and mid-December, according to the announcement from the Ministry of Commerce. The tariff on U.S. crude will begin next month. This mirrors the timetable the U.S. has laid out for 10% tariffs on nearly $300 billion of Chinese shipments. While the U.S. isn’t among the biggest crude suppliers to China, America’s shale boom has made it one of the top producers in the world along with Saudi Arabia and Russia. At a time of OPEC output cuts, sanctions that are strangling supplies from Iran and Venezuela, and rising geopolitical tensions in the Middle East, the import-dependent Asian nation needs reliable crude imports to sustain economic growth. “Escalating trade tension increases the risk of the world moving into recession,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “That could result in even lower oil demand next year, and an even more oversupplied oil market next year.” Nick Bit: The market has got it all wrong! As reported to you earlier the Chinese starting in July have stopped loading US crude. Think of oil supply as a great big lake. It makes little difference where the oil is sucked from. China has to buy oil. If it buys it from the US or Saudis it still coming put of the total oil supply. This is a great big nothing burger! Trump is out of control and the China trade war will cost him the election.