China’s recent decision to impose tariffs on U.S. crude oil, LNG, and coal is expected to have a limited immediate impact on Chinese energy imports, as the volumes from the U.S. have been relatively small even before the trade tensions escalated.
The new tariffs, set to take effect on February 10, could, however, cause disruptions in global energy trade and impact regional markets and energy prices, analysts warn.
This move follows the U.S. imposition of a 10% blanket tariff on all Chinese imports, to which China responded with tariffs of 15% on LNG and 10% on crude oil imports from the U.S.
Although U.S. oil and LNG exports to China have been modest, analysts believe these tariffs won’t significantly harm either country in the short term. However, they could make American crude more expensive, prompting Chinese buyers to turn to other sources, such as West Africa, for lighter, sweeter crude.
The tariffs effectively end U.S.-China energy trade for the time being, according to Reuters columnist Clyde Russell. Data from Kpler and Chinese customs shows that U.S. crude made up less than 2% of China’s crude oil imports in recent months, and U.S. LNG accounted for no more than 12% of China’s LNG imports. In 2024, U.S. crude’s share of Chinese imports is expected to fall further to 1.7%, down from 2.5% in 2023.
China is likely to find it easy to replace the U.S. oil and gas volumes. However, tensions with Russia and an expected “maximum pressure” campaign against Iran could push China to source more crude from the Middle East and West Africa. This could tighten the supply of these grades and drive up prices and shipping costs.
The effects on global LNG trade could be more significant. China has long-term contracts with U.S. LNG exporters, with deliveries scheduled to begin in 2027. However, China has been buying a large portion of its LNG from the U.S. on the spot market. With a 15% tariff on these spot purchases, the economics of buying U.S. LNG are no longer favorable unless Chinese buyers can leverage flexible destination clauses. Unlike Qatar, U.S. exporters allow cargoes to be resold to other buyers, which has given Chinese buyers the option to swap U.S. shipments with supplies from elsewhere, according to anonymous traders.
In the longer term, if the trade war continues, Chinese importers may be reluctant to commit to long-term U.S. LNG contracts. This would negatively impact U.S. LNG developers, who depend on long-term agreements to secure investment in new export projects.
“These tariffs undermine the Trump administration’s efforts to expand American energy exports and strengthen U.S. geopolitical influence,” said Charlie Riedl, Executive Director of the Center for LNG, a U.S. LNG industry group.
If the trade war intensifies, with potential tariffs on Mexico, Canada, or the European Union, it could further disrupt global trade. An ongoing trade conflict between the U.S. and China, the two largest economies, could slow global growth and reduce demand for commodities, including oil and LNG, from the world’s largest importer of energy, China.
Related Topics: