Trump trade war with China to delay new U.S. LNG

China’s retaliatory tariffs on U.S. LNG could “pause” new deals between Chinese buyers and American LNG developers, ultimately delaying new final investment decisions on LNG projects, according to industry analysts.

On February 4th, President Trump imposed a 10 percent tariff on all goods imported from China — a levy that comes on top of existing tariffs. In response, China announced tariffs of its own, although the moves were narrower and more measured. They included a 15 percent tariff on U.S. LNG and coal, and a 10 percent tariff on crude oil, agricultural machinery and some cars and trucks.

Many analysts described China’s tariffs as an effort aimed at avoiding a broader escalation over trade. The tariffs were “targeted and symbolic” because China’s imports of U.S. oil and gas are not enormous to begin with, ClearView Energy Partners, a Washington-based energy consultancy, said in a report.

However, the tariffs could significantly disrupt the momentum for the American LNG industry, which has celebrated the return of President Trump, who has promised to supercharge gas exports.

The U.S.-China trade in crude oil, LNG, and coal is now “effectively dead,” as a Reuters columnist described it. Chinese buyers will avoid new contracts, and existing contracts may result in China reselling LNG cargoes elsewhere. The end result could be slightly higher prices on LNG cargoes more broadly, beyond the U.S.-China trading relationship, as the impacts ripple through the market.

“Specifically, US LNG exports to Europe are likely to increase, while incremental supply from other Atlantic basin suppliers might head to Asia,” Goldman Sachs analysts wrote in a note to clients on February 4th.

The global impact may be modest, but for U.S. LNG developers hoping to get new projects off the ground, the tariffs could be painful.

“The most significant impact to commodity markets in our view is that, much like during the US-China trade tensions in Trump’s first term, we see a potential pause in new long-term LNG contract negotiations between China buyers and US LNG export facilities,” Goldman analysts added. “Given that most proposed US LNG facilities require that a significant portion of their capacity is contracted under long term deals in order to obtain financing, such a pause might delay new US LNG export facilities reaching a final investment decision (FID).”

Reuters notes that Chinese companies have signed deals with U.S. gas exporters for roughly 20 million metric tonnes per annum (mtpa) of LNG capacity, from both existing projects and those under development. By way of comparison, the U.S. exported roughly 88 mtpa in 2024, more than any other country.

Venture Global has 9.5 mtpa of capacity under contract from Chinese buyers, and Cheniere Energy has 4.5 mtpa, according to Reuters. Much of that capacity is located in southwest Louisiana near the border with Texas. For instance, Venture Global’s controversial CP2 project in Cameron, Louisiana — which has not reached a final investment decision — has a 1-mtpa contract with China Gas Hongda Energy Trading Co.

“The tariffs may impact long-term contracting and offtake agreements…and make it more difficult for new US LNG projects to progress toward Final Investment Decisions,” energy consulting firm EBW Analytics wrote in a note to clients.

U.S. supply less reliable

President Trump has used the threat of tariffs in an attempt to browbeat U.S. trading partners into buying more oil and gas, just as he did in his first term. It is unclear if this strategy will pay off — or backfire.

“I told the European Union that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas,” Trump said in a social media post in December. “Otherwise, it is TARIFFS all the way!!!”

Some countries may seek to buy U.S. LNG to curry favour with the erratic American president. Energy executives and government officials in India, Kuwait, Japan, South Korea, and Vietnam had been exploring purchases of more U.S. LNG in recent months, according to Bloomberg. The European Union has also indicated that it would buy U.S. LNG in order to head off Trump’s ire.

But so far it is unclear whether those efforts will materialise and lead to durable long-term sales and purchase agreements (SPAs), which are the long-term contracts, often lasting 20 years, that underpin the business case for building new LNG projects.

While Trump’s threat to impose tariffs on other countries could compel buyers to lock in contracts, it is also possible that Trump’s widening trade war, targeting both foes and allies alike, could spoil prospective deals.

For now, Chinese companies will likely rule out new U.S. LNG contracts. But other countries may come to a similar conclusion — that LNG from the U.S. is unreliable and should be avoided.

TotalEnergies’ CEO Patrick Pouyanne said that Europe should seek a deal with the U.S. that “guarantees” access to American LNG. Worried that the U.S. government might renege on gas exports, Pouyanne said Europe needs more legal assurances. TotalEnergies is active in the U.S., including an equity stake in Rio Grande LNG in south Texas.

“But what happens if all of a sudden the U.S. decides they must export less than they’ve done historically?” Pouyanne told reporters on an earnings call. “We must not pass from a so-called over-dependence on Russia to an over-dependence on another country, even if it’s an ally.”

Meanwhile, the impacts of the trade war could reverberate beyond the U.S. Gulf Coast. China’s tariffs on U.S. LNG could extend to a series of LNG projects proposed in Mexico, which will source its feed gas from American shale gas fields. Mexico Pacific’s Saguaro LNG project on the Pacific Coast of Mexico has contracts with two Chinese buyers, but it has struggled to obtain financing to push the project forward. Tariffs would give investors even more reasons to stay away.

Then, of course, there is Trump’s pending trade war with Mexico itself. Trump agreed to hold off on imposing a punishing 25 percent tariff on imports from Mexico for 30 days. But there’s no way to know if the fragile truce will hold or if Trump will rip it up in a fit of pique. That could further ensnare LNG projects in Mexico.

For its part, the U.S. LNG industry signalled it wants the Trump administration to dial down the trade war, fearing that China’s tariffs could derail commercial momentum for American gas export terminals.

“China’s decision to tariff U.S. LNG in this latest round of tariffs, injects uncertainty into an industry that will play a crucial role as part of America’s global energy dominance,” Charlie Riedl, executive director of the Center for LNG, an industry lobbying group, said in a statement.

“These tariffs on U.S. LNG directly undermine the Trump administration’s efforts to expand American energy exports and strengthen our geopolitical influence,” he added.