The modern trade war with China is impacting many industries. Market volatility is being intensified by US President Trump's pattern of wavering between risks and cease-fires on the topic.

With the starting of August, the markets were sent into a tailspin by President Trump’s threat to implement tariffs on another $300 billions of Chinese imports. The markets were largely affected; however, the energy sector was hit particularly hard. Crude oil prices experienced their largest drop in over four years.

President Trump consequently backed off, mentioning worries about retail spending headed into the holiday season. As if to further highlight the risk, the yield on the 10-year US Treasury bond recently cut down below the yield on the 2-year US Treasury. This yield curve inversion occurs when investors are gathering to safety and it's historically a strong downturn indicator.

Frights of a slowing economy affect the oil industry and therefore, the oil markets sold off so brusquely on President Trump's tariff threat. But he wasn't done. In a series of tweets last Friday, President Trump said he would react against China's response to the tariffs that US had implemented: "China should not have imposed new Tariffs on $75 billions of United States product (politically motivated!). Starting on October 1st, the $250 billions of goods and products from China, now being taxed at 25 percent, will be taxed at 30 percent. Furthermore, the residual $300 billions of goods and products from China that was being taxed from September 1st at 10 percent will now be taxed at 15 percent."

This newest Twitter-salvo mainly put off the markets, with the Dow Jones Industrial Average closing down over 600 points and oil prices shedding another 2 percent.

Rystad Energy Senior Analyst Artyom Tchen sum up the probable impact of the trade war on the oil market: "We consider that the United States-China trade war and resulting weak economic growth sentiment is among those issues that balance supply risks and cap oil prices. We forecast 2019 demand growth at 1.2 million barrels per day (bpd), as opposed to a pre-trade-war prediction of 1.4 million bpd."

But, with the threat of an economic slowdown, a trade war with China impacts the oil markets in two different ways. The oil industry is capital intensive, and some of that capital equipment comes from China. Chinese steel, for example, is considerably cheaper than US steel. If a pipeline company, for example, is forced to buy more expensive steel, it will affect capital budgets and result in fewer projects.

In any case, a last and more uncomplicated way the oil business is affected is that China was turning into an inescapably significant market for US oil sends out. The prior summer US fares to China had arrived at a large portion of a million barrels regularly, but since of the exchange war China gave up purchasing US rough.  Rather they went to Iran for their unrefined petroleum needs.

Enterprise Products Partners CEO Jim Teague recently noted China's unwillingness to sign any long-term agreements for US crude oil: “When I was in China, I heard two words at every meeting: 'Trump and tariffs.'”

Finally, this ongoing trade war is imposing real pain on the US oil industry, and there is no end in sight, that will produce headwinds in the oil markets for the expected future.