China slaps tariffs on US LNG in tit-for-tat trade move

As expected, China retaliated against the U.S. after President Trump announced a list of another $200 billion worth of Chinese goods that will be subjected to tariffs, slapping tariffs on $60 billion worth of U.S. products, including liquefied natural gas (LNG).

Although the tariff is only 10 percent, rather than the initially threatened 25 percent, it is still bad news for US LNG producers, analysts fear.

LNG is an emerging export market for U.S. natural gas producers, and one of their most important tasks at the moment is to secure enough long-term LNG purchase commitments in order to generate enough funds to build new LNG and export capacity.

China is widely seen as the major driver for future LNG demand as Beijing’s anti-pollution fight focuses on a shift from oil to gas, including LNG. Wood Mackenzie reported earlier this week that China’s imports this year could hit 52 million tonnes, after a 45-per cent jump last year, to 38 million tonnes.

At the same time, the United States is quickly turning into a major exporter. An earlier report from Wood Mackenzie said that by the mid-2020s, U.S. production will be second only to Qatar’s, overtaking Australia. Yet this will require a lot of investment, some of which could come from China. If bilateral relations between US and China deteriorate further, this funding would not be available.

The Wall Street Journal quoted the head of S&P Global Platts’ gas and power analytics as saying “It’s a big deal for the U.S.-China gas trade. The tariffs will push Chinese buyers to other sellers in Asia and the Middle East because the US will no longer be considered a low-cost option.”

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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