China is widely expected to stop buying U.S. LNG on the spot market and seek to swap American cargoes from elsewhere after it announced a 15% tariff on U.S. liquefied natural gas in response to the 10% American tariffs across the board.
Chinese buyers could also become more hesitant to commit to long-term contractual supply for U.S. LNG from projects expected to make final investment decisions in the coming years, analysts and industry representatives say.
If the U.S.-China trade dispute escalates, Chinese buyers may not be willing to enter into long-term agreements to buy American energy. This could undermine one of the top priorities of the Trump Administration – boosting LNG exports to reduce the U.S. trade deficit and increase geopolitical influence.
U.S. LNG developers and exporters look to have long-term offtake buyers aligned with contracts before making final investment decisions on projects. That guarantees that their supply will have a firm customer base and steady flows of revenues regardless of the volatility of the global markets. The banks that lend money to LNG export projects also prefer to see contracted future LNG supply from the facility they would back.
China Tariffs Could Undermine FID on New U.S. LNG Projects
The 15% Chinese tariff on U.S. LNG, expected to take effect on February 10, could hurt offtake agreements, according to energy consulting firm EBW Analytics.
The tariff would “make it more difficult for new US LNG projects to progress toward Final Investment Decisions,” the analysts said in a note carried by Reuters.
The U.S. industry, which welcomed the Trump Administration and applauded President Trump for ending the pause on new LNG permits, also expressed concerns.
Charlie Riedl, Executive Director of the Center for LNG (CLNG), a trade group representing many of the U.S. LNG exporters and developers, told Reuters that the Chinese tariffs add uncertainty to the long-term outlook of American LNG exports.
“These tariffs on U.S. LNG directly undermine the Trump administration’s efforts to expand American energy exports and strengthen our geopolitical influence,” Riedl told Reuters.
Before the Chinese tariffs were announced and right after President Trump ended the pause on LNG permitting, Wood Mackenzie said that the U.S. Energy Department is unlikely to begin issuing approvals immediately. The administration will need time to strengthen its decisions against the expected legal challenges. But Wood Mackenzie expects approvals to allow at least one U.S. LNG project to make a final investment decision (FID) this year—possibly more.
U.S.-China LNG Trade
China is not a big buyer of U.S. LNG after returning to purchase the fuel from America following a year-long hiatus between March 2019 and February 2020 during President Trump’s first-term trade war.
In early 2019, China slapped a 25% tariff on U.S. LNG, which killed Chinese imports from America for a year. China introduced a tariff waiver on U.S. LNG in early 2020, which restored trade in the commodity. Still, last year, U.S. LNG accounted for about 5% of Chinese imports.
Large Chinese LNG buyers have more than 20 mtpa in new long-term contracts from the U.S. due to start in the next few years, commodity analysts at ICIS say.
But right now, much of U.S. LNG making its way to China is sold on a spot basis. The Chinese tariffs are widely expected to effectively kill the spot LNG trade from America into China.
Spot sales could generate high returns for sellers, but the U.S. LNG developers looking to take FID on new projects will aim to attract buyers under long-term contracts.
If China backs out of new contractual supply deals with U.S. exporters, some American LNG capacity could falter as developers may need more time to get other buyers to agree to long-term offtake agreements.
U.S. LNG Capacity Will Jump in 2025
At any rate, U.S. LNG capacity is set to increase this year and in the coming years, thanks to projects that have been fully permitted by federal authorities.
The United States remains the world’s largest LNG exporter, ahead of Qatar and Australia, as America’s liquefied natural gas shipments jumped to a new record high from the previous all-time high of 2023.
The U.S. currently has eight operational LNG export terminals—the eighth, Plaquemines LNG, shipped its first cargo in December 2024.
Plaquemines LNG is one of two U.S. LNG terminals that started LNG production in 2024 as Corpus Christi Stage 3 also began LNG production in December.
U.S. LNG exports are expected to jump by 15% in 2025, reaching 14 Bcf/d, thanks to a ramp-up of the Plaquemines LNG and Corpus Christi LNG Stage 3 plants, the EIA said in the Short-Term Energy Outlook (STEO) for December.
LNG export capacity is set for additional growth next year when the Golden Pass project of ExxonMobil and QatarEnergy is expected to come online.
American LNG exports are expected to grow by 2.1 Bcf/d in 2026 to reach an average of 16.2 Bcf/d, the EIA reckons.
By Tsvetana Paraskova for Oilprice.com