China’s new list of $60 billion worth of tariffs on U.S. goods includes liquefied natural gas, threatening a major setback for the Trump administration’s ambition to flood the world with cheap natural gas as a key component of its energy dominance agenda.
China’s Finance Ministry said that it is moving forward with its plans to increase in tariffs of 10 percent and 5 percent on over 5,000 U.S. goods, in response to President Trump’s latest round of tariffs. That includes a 10 percent tariff on American liquefied natural gas starting next month, a big blow to the U.S energy industry. China is the largest growth market for LNG imports, and the U.S. is seeking to be a major exporter.
LNG is the chilled, liquid form to which gas must be converted for shipment in giant tanker vessels across the sea.
Experts and industry officials warn that Trump’s trade war with China is threatening to discourage the world’s fastest growing LNG market from signing long-term contracts with American developers.
“We are disappointed with this development and would like to see the two countries reach a resolution quickly, which is in the best interest of all parties,” said Charlie Riedl, the executive director of the Center for Liquified Natural Gas, a nonprofit trade group. “These tariffs have the power to price U.S. LNG out of the Chinese market. Tariffs will also make long term contracts more difficult to negotiate. Pricing U.S. LNG out of a key market undermines its competitiveness and ability to reduce the U.S. trade deficit while providing good jobs at home and growing the economy.”
U.S. LNG company Tellurian downplayed the impact of China’s tariffs.
“Over time the trade issues will work themselves out, and we expect the Chinese market to continue growing,” Tellurian President and CEO Meg Gentle told the Washington Examiner.
China’s demand for LNG is soaring, and it is relying more on the U.S., becoming the third largest destination for American gas behind Mexico and South Korea.
Chinese imports of U.S. LNG increased from zero in 2015 to 17 billion cubic feet in 2016, to 103 billion cubic feet last year.
But the trade fight with China hangs over potential long-term progress for U.S. LNG exports.
Other countries, including Russia, Qatar, Canada, and Mozambique are also offering LNG at competitive rates. Experts say U.S. supply, despite its cheap prices, is replaceable.
