Oil prices tumbled Tuesday, giving up all the gains accumulated this year as a trade confrontation between the United States and China intensified. West Texas Intermediate (WTI) crude dropped below $72 per barrel, a steep reversal from early-year highs driven by cold weather and sanction fears. The selloff followed Beijing's decision to impose new tariffs on American products, including coal, liquefied natural gas, and crude oil.

China's Finance Ministry said it would impose a 15% levy on U.S. coal and LNG, alongside a 10% duty on oil and agricultural equipment. "The U.S.'s unilateral tariff increase seriously violates the rules of the World Trade Organization," read a statement from the State Council Tariff Commission. Observers warn that the hit to global trade sentiment could reduce overall energy demand.

The move came just as President Donald Trump's 10% tariffs on Chinese goods took effect. While the administration delayed separate planned levies on Canada and Mexico for a month, Beijing wasted no time countering Washington's duties. Equity futures dipped on concerns that escalation of the dispute between the world's two largest economies could slow economic growth.

"The selloff continues this morning," said Tamas Varga, an analyst at brokerage PVM. "There is the question of how long the possibility of tariffs will linger. In their current form, however coercive, they are flexible. They can be withdrawn and re-implemented swiftly as demonstrated yesterday."

Crude futures had surged in January on supply risks stemming from severe cold weather and U.S. sanctions on Russian energy flows. That rally reversed after President Trump threatened a blanket tariff approach that analysts say may trigger a significant dip in global oil consumption. China alone imports around 1.7% of its total crude from the U.S., though any protracted standoff could have broader market repercussions.

"The tit-for-tat measures out from China may not stop at just the 10% tariffs on crude oil," said Kelvin Wong, senior market analyst at OANDA. He explained that any additional moves could "give rise to a stronger U.S. dollar that in turn weakens ... oil prices," especially while OPEC+ sticks to a policy of gradually raising oil output starting in April.

The Organization of the Petroleum Exporting Countries and its allies agreed on Monday to continue measured production hikes. "The OPEC+ group of oil producers agreed on Monday to stick to its policy of gradually raising oil output from April," noted Harry Tchilinguirian, head of research at Onyx Capital Group. He added that the extension of any trade war might undercut demand expectations.

In parallel, Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum announced stronger border enforcement after White House demands to curb immigration and drug trafficking. That pledge prompted Trump to pause threatened duties on goods from those two nations, giving North America at least a temporary reprieve. "The suspension of tariffs on Canada and Mexico for a month gives the market some breathing room," Tchilinguirian said.

Analysts also eye U.S. oil inventory data for the week ending Jan. 31. "Investors will be looking out for U.S. oil stockpile data," one trader remarked. Surveys suggest crude inventories rose while gasoline and distillate supplies tightened. Meanwhile, top importer China saw manufacturing activity slip for a second straight month, fueling additional caution over future demand for energy.