Retaliatory tariffs imposed by China on U.S. energy exports have raised both challenges and opportunities for traders and energy companies. Following President Trump’s announcement of tariffs on Chinese goods, Beijing announced its own tariffs on U.S. liquefied natural gas (LNG) and crude oil, which could reshape the energy export dynamics between the two superpowers.
The Chinese government imposed 15% tariffs on U.S. LNG, with effective date set for February 10. This move has opened avenues for trading houses and global oil giants to engage in potential swap deals, reselling U.S. cargoes on behalf of Chinese buyers who may seek alternatives from other regions. According to reports from trading circles, major companies such as Vitol Group, Trafigura, Shell Plc, and TotalEnergies SE are positioned to facilitate these arrangements.
Within hours of the Chinese tariff announcement, inquiries were being made by Chinese LNG buyers seeking to swap U.S. shipments for imports from other regions, highlighting the proactive strategies traders are deploying. Notably, Vitol had already engaged with China Gas for future supply swaps from the U.S. Potential deals could emerge as Chinese buyers reassess their strategies amid retaliatory tariffs.
China’s recent actions and policies could also disrupt existing relationships between U.S. LNG suppliers and Chinese buyers. U.S. producers, including Cheniere Energy, Venture Global, and NextDecade, who previously explored long-term contracts with Chinese firms, may now find these efforts stalled or effectively frozen due to the tariffs. The current climate has created significant uncertainty for U.S. LNG suppliers, who previously enjoyed access to the Chinese market.
According to trade experts, the tariffs threaten to complicate U.S. efforts to leverage energy exports to expand its influence abroad, especially as the Trump administration aimed to boost energy leadership on the global stage. Charlie Riedl, executive director of the Center for LNG, urged the administration to prioritize U.S. LNG exports during trade negotiations, warning against barriers to energy leadership resulting from the tariffs.
Meanwhile, the situation for U.S. crude oil exports appears similarly precarious. Following the tariff imposition on U.S. crude imports, analysts predict oil export growth may stall, potentially decreasing access to Chinese markets. China's tariffs had already slowed the growth of U.S. crude exports to just 0.6% year-over-year through 2024.
China is expected to consume about 166,000 barrels of U.S. crude daily, which equates to roughly 5% of total U.S. export cargoes. Analysts predict export volumes may decrease to 3.6 million barrels per day (bpd) by 2025, due to tariffs driving U.S. oil grades away from the Chinese market. This is particularly alarming considering the U.S. had just emerged as the world’s third-largest oil exporter since the lifting of the ban on domestic oil exports.
One of the main challenges faced is the surging competitiveness of oils from other nations, especially with U.S. grades rendered less appealing due to tariff constraints from China. Analysts indicate some U.S. medium-sour crudes, which enjoyed substantial trade with China, will likely remain unsold or redirected to different markets.
Among the top exporters of U.S. crude to China were companies like Occidental Petroleum, which sold various cargoes of West Texas Intermediate (WTI) oil. The effects of the Chinese tariffs mean these companies would have to explore alternative markets to maintain their export levels.
China’s total crude imports from the U.S. accounted for only 1.7% of its overall imports and the effects of tariff hikes could diminish this figure even more. Notably, Chinese imports of oil from Canada surged by 30% last year, indicating possible redirection from U.S. oil.
While the immediate future may seem bleak for U.S. energy exports to China, the wider industry is closely watching the Chinese government's approach to tariffs. The grain markets, too, remain on edge, particularly as tensions loom over agricultural trade, but analysts believe tariffs on U.S. wheat remain unlikely for now.
The intertwining of the two economies is evident as exporters on both sides brace for the repercussions of this trade fight, which not only threatens immediate profits but also the overarching relationships built over the years. Analysts affirm the situation warrants comprehensive attention as oil and gas markets could be reshaped significantly by these trade policies.