How is cooking oil caught up in US-China trade tension?

The real story isn't "cooking oil" but UCO

On October 14, President Trump floated ending some trade ties with China, including imports of "cooking oil" (see Reuters article). That phrasing invites a basic question: why would the United States import cooking oil from China?

The answer is that the focus isn't ordinary cooking oil at all, but UCO or Used Cooking Oil. And UCO is tied, maybe unexpectedly, to renewable energy policy.

UCO and international trade

Here is an USDA report as part of Global Agricultural Information Network (GAIN) reports. It is reproduced here for convenience:

The People's Republic of China's exports of used cooking oil (UCO) reached a record high in 2024. The United States was the top export market for China's UCO at 1.27 million metric tons (MMT), up approximately 52 percent from 2023 and accounting for approximately 43 percent of China's total UCO exports. However, China eliminated the 13 percent export tax rebate for UCO on December 1, and December UCO exports dropped by 60 percent month over month.

Market reports indicate that, after the Lunar New Year in early February 2025, China's UCO market slowed further, primarily due to declining order numbers and prices, traffic congestion, and logistics delays, in addition to the tax rebate cancellation. Market sentiment remains low, with many traders holding onto their stocks or selling at lower prices due to cash flow issues and a lack of confidence in the market. Post-holiday, purchase and port prices have generally dropped by $14 - $28 per metric ton (MT), leading to reduced collection volumes. Sellers are reluctant to sell at lower prices, and many traders are minimizing purchases to avoid losses from price fluctuations.

According to industry contacts, international demand for UCO has reached unprecedented levels, with significant import increases into Europe, North America, and particularly Singapore in Asia. This contrasts sharply with the sluggish domestic market. Recent reports indicate that traders in Singapore are nearing deals to sell Chinese UCO at over $1,090 per MT. Meanwhile, both regular and premium Chinese FOB UCO bidding prices have risen to $1,040 or higher per MT, with premium UCO showing more pronounced increases. A Shanghai-based market source revealed that premium (second-generation) UCO prices have risen by about $40 per MT compared to pre-holiday levels, with transactions at $1,040 per MT FOB China.

An exporter in East China noted that recent port purchase prices for regular UCO in the region were around $975 per MT, predicting further price increases. Industry analysts believe the current domestic market slump is temporary, and with growing international demand and tightening domestic supply, the UCO market is expected to rebound. According to industry sources, driven by urgent shipping needs, supply constraints, and rising global demand for biofuels, the UCO market is expected to enter a new growth wave. Sources report that future market trends will heavily depend on supply-demand dynamics, policy adjustments, and international market developments.

In other words, the United States has been importing millions of tons of UCO from China, at roughly $1000/ton, making it a billion-dollar business. When China removed its 13% export tax rebate, that cross-border flow suddenly got less profitable and cooled.

Why does UCO matter for the United States? Because UCO is a feedstock for biodiesel, renewable diesel, and sustainable aviation fuel (SAF). US clean-energy incentives and fuel standards create strong demand for low-carbon feedstocks, and UCO fits that bill. Put simply: renewable energy policy turns a waste cancerous product into a valuable input, and trade policy shapes where that input comes from.

A bit more context

Historically, UCO, aka "gutter oil", was sometimes recycled back into the food system in China, prompting scandals and a regulatory crackdown (see Wikipedia overview). Over the last decade, stricter enforcement has pushed UCO toward industrial uses. In parallel, global climate policy, including US incentives in particular, have bid up demand for waste-oil feedstocks. China's move to cancel UCO's export tax rebate can be read as consistent with a strategy to favor domestic value-add (e.g., local refining) and to ensure tighter control over a resource that now has strategic value for low-carbon fuels.

Conclusion: What this teaches us about "unexpected links"

Policy spillovers are real. US clean-energy incentives ripple into global waste-oil supply chains; a Chinese export-tax tweak ripples back into US biofuel margins. Energy policy and trade policy are joined at the hip.

Waste becomes strategic. A former liability (gutter oil) is suddenly a valuable low-carbon feedstock, attracting traders, tax policy, and geopolitics. "Trash" can turn into an energy-security input overnight once incentives shift.

Small levers, big flows. A 13% export-rebate change moved million-ton trade flows and price levels within weeks. In commodity niches with tight balances, minor policy dials can have outsized effects.

Beware linear narratives. Headlines about "cooking oil" miss the mechanism: UCO -> renewable fuels -> credits/standards -> cross-border arbitrage. The lesson is to chase the mechanism, not the meme.

Cross-domain literacy pays. Understanding this story required a bit of ag-trade, energy policy, and freight/logistics. The big takeaway: seemingly unrelated domains often hide the causal chain. If you follow the incentives, the links stop being "unexpected".