On Tuesday, February 4th, Beijing announced that it will impose a 15% tariff on liquefied natural gas (LNG) and coal imports from the United States in response to President Trump’s new tariffs on Chinese imports. However, The Wall Street Journal believes that Beijing’s energy tariffs on the United States are unlikely to have a significant impact.
In early trading on Tuesday, the international benchmark natural gas prices remained relatively stable.
The United States is the world’s largest exporter of liquefied natural gas, and with new export facilities coming online this year, its export volume is set to expand further. China, on the other hand, is the world’s largest importer of liquefied natural gas in the thriving global market.
Analysts at ABN Amro Bank in the Netherlands stated that only 6% of China’s imported LNG came from the United States in 2024. Official U.S. data shows that LNG exports to China constitute less than 4% of total U.S. LNG exports, significantly behind the top exporter, the Netherlands (14%).
The Wall Street Journal mentioned that if China continues its tariffs on LNG imports, it might encourage Chinese importers to source LNG from other countries. Consequently, the U.S. may consider diverting more LNG exports to Europe, a market that could be willing to purchase more American LNG.
“If China’s demand for U.S. LNG decreases, Europe could benefit. For months, natural gas prices in Europe have been on the rise, partly due to the end of natural gas supplies from Russian pipelines and cold winter weather,” the report stated.
Nevertheless, the global LNG market appears prepared to handle the situation. The flexibility of transporting LNG via large tankers makes it less susceptible to pipeline restrictions that require goods to be redirected to different destinations.
The Wall Street Journal pointed out that with a surge of new ships entering the market, the leasing costs of vessels have recently dropped to historic lows. Coupled with ample natural gas inventories in Asia, these factors could help mitigate the impact of Chinese tariffs on LNG prices.
Furthermore, Beijing announced an additional 10% tariff on U.S. oil imports starting from February 10th. China stands as one of the primary importers of U.S. oil. By 2023, China is expected to import nearly 1 million barrels of oil per day from the United States, representing roughly a tenth of U.S. oil exports.
Although China is a significant market for U.S. energy, it is not the largest customer for major commodities like crude oil and coal. Energy exporting countries typically have the flexibility to find new buyers easily.
U.S. crude oil prices retreated on Tuesday after gains on Monday. Monday’s volatility was related to President Trump’s phone call with Canadian Prime Minister Trudeau, agreeing to postpone tariffs on Canada for 30 days.