UPDATE: China retaliates with 15% tariff on US LNG
Roman Kazmin
04-Feb-2025
UPDATE: China retaliates with 15% tariff on US LNG
SINGAPORE (ICIS)–China has announced a 15% tariff to be imposed on coal and LNG imports from the United States as a retaliation to US trade tariffs, the country’s Ministry of Commerce said in a statement.
“In accordance with the Tariff Law of the People’s Republic of China, the Customs Law of the People’s Republic of China, the Foreign Trade Law of the People’s Republic of China and other laws and regulations and the basic principles of international law, and with the approval of the State Council, additional tariffs will be imposed on some imported goods originating from the United States starting from 10 February 2025.”
A 10% tariff will also be imposed on crude oil, agricultural machinery, and a score of other products. US president Donald Trump and Chinese President Xi Jinping are expected to talk this week on trade and other issues.
The US has imposed 10% tariffs on Chinese goods starting 4 February.
“This will drive even more US volumes into Europe, and leave portfolio players with suboptimal logistical flows,” said Saul Kavonic, oil and gas analyst with research firm MST Marquee.
“Chinese buyers will pay the tariffs, so will be trying to minimize the US volumes they take contractually, and swap that out for non-US volumes. This benefits other regional producers such as Australia, who will be seen as relatively more reliable after this.
“The negative impact on US LNG from these tariffs will only partly offset the strong appetite from other buyers to procure more US LNG under pressure from Trump to rebalance trade deficits. The tariffs will create material market inefficiencies, which will benefit some LNG traders in the regions. It may push prices higher everywhere on the margin, as flows become suboptimal.”
CHINA IMPORTS
China imported 4.4 million tonnes of LNG from the United States in 2024, ICIS data shows, out of a total of 79.24 million tonnes.
If the tariff is enforced and stays beyond the upcoming negotiations expected this week between US President Donald Trump and Chinese President Xi Jinping, importers could optimize the US-based positions by diverting them elsewhere.
However, the imposition of tariffs on energy by the Chinese government fundamentally means higher energy costs for the country, which increases the cost of industrial production and inflationary pressure.
The growing tensions in the commercial relationship between the countries could also equate to reluctance by Chinese buyers to commit to new long-term positions with US-based suppliers.
Political tensions with the US could turn Chinese buyers to alternative sources of LNG and pipeline gas, including Russia.
The move is the latest in a series of tariff exchanges that so far have involved Canada and Mexico in addition to China.
The market anticipates that the next wave of tariffs could target members of the European Union.
EU states are unlikely to impose retaliatory tariffs on imported energy, as the cost of gas is already growing following the halt of Russian pipeline gas supplies to the region. Roman Kazmin
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