When President-elect Donald Trump threatened European exporters with tariffs on everything ahead of the elections, there were probably many in Europe hoping he would never get back into the White House. Now that this is a fact, the tariffs are a matter of negotiations—and those may well involve a lot more U.S. LNG.
The United States is currently running a trade deficit of $240 billion with Europe, per Reuters. The biggest exporters to the U.S. are Germany, Italy, Ireland, and Sweden, according to Eurostat, accounting for the bulk of that trade deficit. The United States is the EU’s biggest trade partner, and oil and natural gas are among the top U.S. imports into Europe.
Donald Trump has repeatedly stated that he disapproves of this state of trade affairs and that Europeans will “pay a big price” for it unless they start importing more American goods. To this, Reuters’ columnist Gavin Maguire suggested that Europe might strike back by reducing its intake of U.S. LNG, interfering with Trump’s plans for higher oil and gas production.
This could have been a potential course of action for Europe in a reality where it was not dependent on imported energy—and where the U.S. was not its biggest LNG supplier. In 2023, the United States accounted for close to half of Europe’s total imports of liquefied natural gas, the U.S. Energy Information Administration reported in February this year.
The number, 48%, was an increase from 44% in 2022 and just 27% in 2021. The war in the Ukraine really spurred U.S. LNG exports to Europe and capacity expansion projects. This year, however, growth has been muted, with the EIA reporting that net natural gas exports from the country remained essentially flat on the year during the first half.
The almost absent growth was a result of several things. First, Europe had another relatively mild winter, and gas remained in storage. Second, Germany—the largest gas consumer on the continent—continued to deindustrialize, with its shrinking economy affecting energy demand in general and gas demand specifically. Third, summer is trough demand season in Europe when it comes to gas. Winter, on the other hand, is a very different season. Winter is when Europe consumes the most gas—and coal.
Reuters’ Maguire suggested that the European Union is moving away from gas altogether because of its high price, which end consumers can hardly bear for any sustained period of time, and which has prompted industrial consumers to reduce their demand as well. He pointed out that high prices and the economic slowdown caused a 20% decline in European LNG imports this year. Then he went on to suggest that Europe might decide to impose tariffs on U.S. energy imports.
According to the latest signal from the EU’s top executive official, Commission President Ursula von der Leyen, this is not about to happen. In fact, von der Leyen suggested just days after the elections that Europe could boost its purchases of U.S. liquefied gas.
“Common interests are, for example – this is one topic that we touched upon, I would not say discuss – it's the whole topic of LNG,” the head of the European Commission told media last week, as quoted by AFP. Saying that Europe still buys a lot of gas from Russia, von der Leyen then asked, “Why not replace it by American LNG, which is cheaper for us and brings down our energy prices.”
Of course, the reason that Europe is still buying so much Russian gas is that it is cheaper than U.S. gas. Nevertheless, since it is politically sensitive, EU officials have been looking for ways to change that—and the most obvious choice has been U.S. LNG since other large exporters either have limited capacity for export growth or, in the case of Qatar, prefer long-term contracts that European governments try to stay away from in light of their transition ambitions.
So, Trump has signaled that he wants the U.S. to produce more natural gas and that he also wants to export more goods in general to Europe. Europe, for its part, has signaled via its top executive official that it would be happy to take in more U.S. gas—not that it has much of a choice. It would certainly be a challenge for U.S. gas producers to redirect their LNG flows from Europe to Asia should Europe decide that U.S. LNG is too pricey, as Reuters’ Maguire suggests in his commentary. Yet it would be much more challenging for Europe to find another gas supplier comparable to the U.S. in terms of output size that is not Russia. In fact, this would be impossible.
Essentially, U.S. LNG producers and European gas importers are stuck with each other. The relationship is not one of equals, but it is a mutually beneficial one, so both sides have reason to want to maintain it. Tariffs won’t make Europeans like Trump more, but they will likely make them buy more American LNG, regardless of price. Of course, this has a whole host of other implications for the European economy and its growth prospects, as well as its long-term LNG purchasing power but that may be a question for another presidential term.
By Irina Slav for Oilprice.com