Oil prices increased by over $1 on Friday as the trade war between the US and China escalated after US President Donald Trump imposed more tariffs on imports from the Asian giant.

Brent crude futures LCOc1 recorded their steepest fall in more than three years when then declined by over 7% on Thursday, while US West Texas Intermediate (WTI) crude futures CLc1 fell by around 8%, its worst decline in more than four years, Reuters reported.

Thursday’s collapse in oil prices halted a rally that was built on a steady decline in US inventories, while global demand also looked shaky due to the trade dispute between the two biggest economies and crude consumers. Brent futures increased by $1.53, or 2.6%, to $62.03 a barrel, while WTI futures rose by $1.02, or 1.9%, to $54.97.

On Thursday, Trump said that he would impose a 10% tariff on $300bn of imports from China from 1 September 2019 and increase tariffs if China’s President Xi Jinping fails to arrive at a trade deal.

Trump’s announcement extends tariffs to almost all Chinese imports into the US, signalling an end to the temporary truce in the trade war that disrupted supply chains globally and shook the financial markets. The report said that Brent and US crude are on track for a decline of more than 2%.

OANDA market analyst Alfonso Esparza said in a note: “Global growth estimates have been under pressure from the tariff war and the move by the U.S. erases all the goodwill gained earlier in the week when U.S. negotiators were in Shanghai to kickstart trade talks.”

The trade dispute between the US and China has also taken a toll on the economy, resulting in a slowing down of manufacturing activity in July 2019.

Manufacturing activity in the US also declined last month, falling to almost a three-year low. Construction spending also decreased in June 2019, with investment in private construction projects recording the lowest level in one to one and a half years. The economic slowdown has also contributed to the fall in oil demand in the US, the world’s biggest oil consumer.

According to the US government data this week, oil refineries in the country processed 17.4m barrels per day on average over the past four weeks, a decline of 1.3% from 2018.