U.S. crude oil prices fell nearly 2% on Tuesday as U.S. tariffs on China took effect, but the U.S. postponed a decision by a month on higher tariffs it plans to impose on neighbors Canada and Mexico.

Brent futures were down 87 cents, or 1.2%, at $75.09 by 0617 GMT. WTI crude was down $1.32, or 1.8%, at $71.84 a barrel.

U.S. tariffs on Chinese imports of 10% came into effect at midday in Asian trading.

China responded with crude, coal, and LNG. Starting Feb. 10, Beijing retaliated by imposing a 15% tariff on U.S. coal and liquefied natural gas and a 10% tariff on crude.

China’s counter-tariffs on the US could be seen as a sign of escalation that would reduce the likelihood of an interim solution similar to the US’s agreements with Mexico and Canada.

Broader risk perceptions could dampen optimism amid changing dynamics, fueling oil price losses.

Market participants have been pricing in potential downside risks to global growth in the event of further retaliatory measures from both the US and China.

China’s 2024 crude oil imports from the USA make up 1.7% of its total imports of crude, customs data show.

WTI flows to China will be affected, as a 10% tariff would make WTI delivered to China very expensive compared to other alternative crudes, such as Kazakhstan’s CPC and Abu Dhabi’s Murban.

However, in the bigger picture, this should not have a significant affect on WTI’, as WTI can still easily flow to other regions.

Justin Trudeau and Mexican President Claudia Sheinbaum said they agreed to increase border enforcement efforts in response to Trump’s demand for tougher measures against immigration and drug trafficking.

That would halt tariffs on energy imports from Canada and Mexico for 30 days,.

On the demand side, investors will be looking at U.S. oil inventory data for the week of Jan. 31. Analysts expect crude oil inventories to rise, while gasoline and distillate inventories are likely to fall.

OPEC+ is likely to bring more supply in April despite all.