China retaliates vs U.S. LNG, rest of Asia kowtows to Trump

In a tit-for-tat move over the Trump administration’s recent 10 percent tariff on all Chinese goods entering the U.S., Beijing slapped a 15 percent tariff on U.S. LNG imports in mid-February. 

In early March, the U.S. then added another 10 percent tariff on all Chinese imports, increasing total duties to 20 percent. On March 10th, China upped the ante even more by slapping a 15 percent tariff on more U.S. goods, including agricultural and farm products.

However, China first targeted U.S. LNG imports because it’s possible that Beijing saw U.S. LNG as a product that could maximise harm to the US while minimising harm to itself, Michael Stanaitis, Senior Lecturer at the American University School of International Service, told Gas Outlook.

“First, LNG , similar to oil,  is fungible and can eventually be redirected on the global market.,” he said. “I suspect that China believes it can adequately adjust to domestic and/or Russian gas while also shifting some energy production to non-LNG sources like coal.”

“[Secretary of State] Marco Rubio has been outspoken about using U.S. LNG exports for leverage in trade negotiations. By placing duties on U.S. LNG first, I imagine China is attempting to preempt this claim of leverage in any bilateral trade negotiations that might ensue,” he added.

Notwithstanding, both the U.S. and China are LNG powerhouses, but at opposite ends of the spectrum. The U.S. is the world’s top LNG exporter, while China is the top global LNG buyer as well as a major secondary trader of the fuel. In 2024, the U.S. was the fourth largest LNG supplier to China, behind Australia, Qatar and Russia. Last year, China imported some 4.16 million metric tons of LNG from the U.S., worth US$2.4 billion, according to customs data.

An S&P Global report said that Chinese traders now have to manage their exposure to LNG from the U.S. after the 15 percent tariff announcement. That effort includes trying to swap U.S.-origin spot market LNG for cargoes from other destinations and suppliers to avoid paying the new duty. Chinese traders hope to deliver U.S.-origin LNG to Japan, South Korea, Taiwan and Southeast Asia, while swapping cargoes from Australia, Indonesia and Malaysia and other locations.

Chinese LNG demand weakness

However, China’s new tariff could have a smaller impact that expected since its U.S.-origin LNG imports are already down 50 percent this year due to weak Chinese demand and higher prices for the fuel in Europe. China’s overall LNG imports in the first three months of the year are projected to be the lowest since 2020 – which was during the onset of the Covid-19 pandemic – plunging some 22 percent to 15.8 million metric tons, according to analytics firm Kpler.

Though they have retreated since last month, European gas prices reached a two-year high in February, breaching the €58.25/MWh ($US60/MWh) price point, creating arbitrage opportunities for traders repositioning cargoes from Asia to European buyers. That’s a pivot from historical arbitrage action that usually saw higher spot prices for the fuel in Asia, which resulted in supply being diverted from Europe to the Asia-Pacific region.

Asian LNG imports, for their part, dropped to their lowest point in nearly two years in February, while Europe’s surged to the second-highest on record, Reuters said.

Bowing to U.S. pressure

While China has ramped up retaliatory tariffs on LNG from the U.S., Asia’s other major LNG buyers — Japan, South Korea, India and Taiwan — the world’s leading LNG importers after China, respectively, are ready to ink more deals to offset Trump administration tariff threats.

A Reuters report said in February that, interviews with more than a dozen sources, including current and former U.S. and Asian government officials, show how the Trump administration is moving to recast economic relations with East Asia by binding its regional allies to the U.S. through increased investment in U.S. fossil fuels, predominantly LNG.

Japan, for its part, has been under the most pressure to buy additional U.S.-origin LNG cargoes. In a meeting with Trump in Washington D.C. on February 7th, Japanese Prime Minister Ishiba Shigeru agreed to expand Japanese imports of American LNG, notably from the yet-to-be constructed Alaska LNG project, a Trump favourite to try to lock in more Asian market share for the fuel. Tokyo-based Nippon said the decision “reflects U.S. aims to reduce its trade deficit with Japan and the Japanese desire to secure a stable supply of energy.”

However, most of Japan’s largest LNG buyers and utilities (JERA, Tokyo Gas, Osaka Gas, and Kansai Electric) are already over-contracted for LNG amid waning domestic demand for the fuel and are heavily re-selling it on the spot market as secondary traders.

As such, it seems that in order to appease Trump, Japan could be buying more LNG that it will need in the future, especially as it continues to bring more renewable energy sources and additional nuclear power reactors back into play. Japan’s falling LNG demand has created a shift in global LNG markets.

South Korea is also planning to buy more American LNG. Only 11 days after Trump took office, Business Korea said that the country is set to significantly alter its energy import strategy by planning to import up to 7 million tons of U.S. LNG annually.

The plan is bold as it aims to replace longtime LNG supplier Qatar with more U.S.-origin LNG and also invest in a new terminal on the U.S. West Coast to facilitate these imports. The Business Korea report called it “a pivotal shift in South Korea’s energy procurement landscape.”

India, likewise, is pledging to buy more U.S.-origin LNG amid Trump tariff threats after Indian Prime Minister Narendra Modi met Trump in Washington on February 14th. And finally, on March 21^st, Taiwanese state-run energy company CPC Corp. reached a preliminary deal to invest in the US$44 billion Alaska LNG  project.

(Writing by Tim Daiss; editing by Sophie Davies)