During his campaign, President Donald Trump threatened the U.S.’s biggest trade partners with 25% tariffs unless they addressed the trade surplus with the United States. Experts warned that this approach could be risky. However, Bloomberg recently reported that, while the strategy might not be perfect, it appears to be having an effect.
Asian countries, in particular, are increasing their demand for U.S. crude oil and LNG (liquefied natural gas) shipments. The aim is to avoid further economic pain from potential tariffs. Energy analyst Saul Kavonic from MST Marquee told Bloomberg that trade partners view purchasing U.S. LNG as a way to improve tariff negotiations with the Trump administration. Orders for U.S. energy products have surged since the November 2024 elections.
In the aftermath of the elections, Trump specifically suggested that the European Union should increase its U.S. LNG purchases to address its significant trade surplus with the U.S. European Commission President Ursula von der Leyen initially said the EU could easily stop buying Russian LNG and replace it with U.S. gas. However, this idea was flawed. The EU continues to purchase large volumes of Russian LNG, mainly due to price differences, making it difficult for European buyers to follow Asia’s lead and buy more U.S. LNG.
As the Financial Times pointed out, the EU is highly sensitive to price, with one EU official calling the price issue “delicate and decisive.” Still, recent developments show that the EU is indeed increasing its U.S. LNG imports. This is largely due to dwindling gas storage levels and high seasonal demand. According to Reuters, at least six LNG cargoes have been redirected from Asia to Europe. Europe is paying a premium for these cargoes, while Asian buyers are showing their own price sensitivity.
“The diversions are happening because Asian prices aren’t high enough to compete with European prices for these cargoes,” said Martin Senior, head of LNG pricing at Argus, in an interview with Reuters.
On his first day in office, Trump also reversed the Biden administration’s halt on new LNG export capacity, which will increase supply over the next four years. While this could lead to lower prices depending on demand, Europe faces a tough challenge: balancing its desire to cut energy costs to boost its competitiveness while also pleasing the U.S. by buying more American oil and gas, which come at a premium compared to nearby alternatives.
Asia is in a somewhat better position due to its proximity to the U.S. However, analysts caution that Asian buyers can’t significantly increase their U.S. oil and gas purchases right away due to existing long-term contracts. These contracts could, however, drive further growth in U.S. oil and gas exports if countries sign new long-term deals with the U.S.
Despite the challenges, Trump’s tariff threats seem to be achieving their intended effect, particularly with U.S. trade partners in Asia and Europe. As for Canada, Trump has reiterated his threat to impose 25% tariffs on both U.S. neighbors, set to begin on February 1st. In response, Canada has said it is preparing retaliation measures if necessary.
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