China is set to impose a 15% tariff on liquefied natural gas (LNG) and coal imports from the U.S. as a countermeasure to American tariffs.
China's move to impose retaliatory tariffs on liquefied natural gas from the US is set to create a rush to separate the world's largest buyer and seller of this super-chilled fuel.
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Beijing rolled out a 15% tax on American gas right after President Donald Trump slapped tariffs on goods from China. Last year, China sourced about 6% of its LNG from the US.
This action is likely to lead Chinese buyers with long-term contracts to offload their US shipments to other importers. Many of these importers have already been selling off a significant portion of their US volumes to markets like Europe, where prices are more appealing.
Chinese LNG buyers are already reaching out to partners in Asia and Europe to swap more US shipments for cargoes from different sources, according to traders who prefer to remain anonymous due to media restrictions.
The disruption in trade flows could "push prices higher everywhere on the margin," noted Saul Kavonic, an energy analyst at MST Marquee. "The tariffs will create significant market inefficiencies, benefiting some LNG traders in those regions."
As long as trade tensions stay high, Chinese companies are unlikely to enter into new long-term contracts with proposed US projects. This spells trouble for American exporters who need to secure buyers to get the financing needed for construction.
Trump, focused on the US's significant trade deficits with various countries, has made it clear he wants to leverage the nation’s energy dominance to address this imbalance. His threats have led some buyers, like India and Japan, to discuss acquiring more US gas, while pushing Chinese firms away.
Beijing has previously targeted American LNG, imposing tariffs on US imports back in 2018 during Trump’s first term.