Analysts believe that China’s 15 percent tariff on U.S. liquefied natural gas — the tariff went into effect Monday — will undermine America’s ability to sell energy to the world.
In fact, Americans need not be especially concerned. The U.S., the world’s energy superpower, can get along without Chinese purchases of natural gas. In the future, global demand for the fuel will almost certainly outstrip supply.
A Reuters headline tells us that the “trade war” with China “Casts Dark Cloud” over new American LNG projects.
“China’s decision to slap retaliatory tariffs on liquefied natural gas imported from the U.S. will trigger a scramble to decouple the world’s biggest buyer and seller of the super-chilled fuel,” Bloomberg News predicted.
That assessment would be correct, of course, if Chinese parties stopped buying American LNG. Bloomberg reported that importers in China are already offloading U.S. cargoes to other markets, especially Europe, where prices are higher.
But not everyone agrees that the Chinese will shun American gas, especially in the long run. Jonathan Bass of Argent LNG, for one, suggested to me that Beijing might secretly subsidize its customers with the tariffs it collects.
Regardless of what Beijing does, China needs energy. As a friend of mine told me this month, “You can’t run a factory in Guangdong province when the lights are off.”
In any event, there is another tariff effect that many now worry about.
“Chinese firms are unlikely to sign new long-term contracts with proposed U.S. projects as long as trade tensions remain high,” Bloomberg reported. “This is bad news for those American exporters that need to lock in buyers before securing necessary financing to begin construction.”
But this is also not a great concern. For one thing, China, the world’s biggest importer of LNG, took less than 6 percent of America’s LNG exports last year.
American export facilities will therefore be built, with or without Chinese support. Currently, there are seven operating LNG export terminals onshore in America. Six more are under construction, five have been permitted and 10 are under regulatory review.
“Energy is the foundational brick of the global economy, and the U.S. has lots and lots of it,” Bass told me. “The world will come to us as there is, from a practical viewpoint, no other choice. Our gas is cleaner than any other gas in the world. We have the planet’s most desirable molecules.”
The risk for countries is of not having enough energy, not of having too much. Bass predicts that future wars will be fought over the resources needed to produce electricity. Resource-poor countries, such as our allies Japan and South Korea, will be scrambling for fuel.
And renewables? “Climate activists talk about exiting fossil fuels, but what do you exit to?” asks Bass. “There is nothing to transition to.”
In the meantime, some are concerned about America overproducing gas and overbuilding export terminals. But President Trump is not one of those people.
“In his first term, President Trump embraced a pro-energy policy to take advantage of recent advances in American oil and gas production,” K.T. McFarland, then-deputy national security advisor, told me. “American energy companies developed new engineering, mapping and drilling techniques. We could now discover and extract abundant amounts of oil and natural gas cheaper, cleaner, faster, safer and more reliably than other suppliers.”
Trump not only understood that increased production made America energy independent, but he also realized that he had a tool to drive energy prices down and deprive bad actors of funds.
“Lower prices meant Iran couldn’t pay for proxy wars against Israel and Russia couldn’t pay for war against Ukraine,” McFarland pointed out, referring to the absence of these conflicts during Trump’s first term. “Arab countries realized they couldn’t count on high oil revenues to fund their budgets, so they sought peace with Israel and signed the Abraham Accords.”
Trump is dusting off this strategy in his new term with his emphasis on opening areas for drilling. He also ended by executive order President Biden’s “pause” on the issuance of permits for new LNG export facilities.
In fact, Trump’s strategy is that of President Ronald Reagan, who worked with Saudi Arabia in particular to reduce commodity prices and starve the Soviet Union of revenue.
“We can save the world again,” said Bass, “but this time by flooding the planet with good ole American LNG: Imagine what would happen if Vladimir Putin and the ayatollahs in Tehran ran out of cash.”
MIT’s John Sterman calls the U.S. a “petrostate.” It isn’t that, but U.S. gas production has increased 50 percent over the last decade, and in 2023 the U.S. became the world’s leading exporter of LNG. Petrostate or not, America is already taking advantage of the situation.
According to Bloomberg, Trump’s “high stakes bid to use natural gas exports as leverage to expand U.S. influence in Europe and Asia appears to be gaining early traction.”
“Government officials and energy executives from countries such as India, Kuwait and Japan have been holding talks about procuring more U.S. gas, according to people with knowledge of the matter.” On Jan. 24, Bangladesh signed a 20-year agreement with Bass’s Argent LNG, an American company, to purchase 5 million tons of CNG per annum.
Rep. Carlos Gimenez (R-Fla.) wants to “make America the energy spigot of the world.” That’s a great idea, because when Americans drill for profit, they also drill for freedom, peace and stability.
