China has just dealt a heavy blow to the global LNG market by imposing a 15% tariff on LNG imported from the US.
The move comes shortly after US President Donald Trump imposed an additional 10% tariff on Chinese goods, marking a new escalation in trade tensions between the world's two leading economies.
Bloomberg said that with China - the world's largest LNG customer - separating from the US, the leading LNG supplier, the flow of energy trade will be strongly disrupted.
Chinese importers are looking to resell US LNG under long-term contracts to other markets, particularly Europe, where gas prices are more attractive.
The disruption could push up global LNG prices, said Saul Kavonic, an energy analyst at MST Marquee. “The tariffs will create significant uncertainty in the market, which will create opportunities for some regional LNG traders,” Kavonic said.
Prolonged trade tensions have also made Chinese companies hesitant to sign long-term contracts with new US LNG projects, putting US exporters in a difficult position as they need to secure output before raising capital to build new production facilities.
President Donald Trump has repeatedly emphasized his strategy of using America’s energy power to balance the trade balance. However, this policy is pushing China away from American LNG, while also encouraging other countries such as India and Japan to negotiate more gas purchases from the US.
This is not the first time China has imposed tariffs on US LNG. Beijing imposed similar tariffs in 2018 during President Donald Trump’s first term. Given the current situation, the LNG trade war between the two powers could drag on, reshaping the global energy landscape for years to come.
