Trade war with China threatens US LNG export ambitions

Donald Trump’s escalating trade war with Beijing poses a significant threat to billions of dollars worth of planned US liquefied natural gas (LNG) export projects, many of which rely on China as a major buyer. Analysts, industry sources, and company filings suggest that this development could also undermine Trump’s ambitions to revitalize US business and significantly expand energy production.

“Tariffs could impact long-term contracts and purchase agreements… and make it more difficult for new US LNG projects to move towards Final Investment Decisions,” analysts at energy consultancy EBW Analytics noted in a report on Tuesday, referencing Beijing’s retaliatory tariffs on US energy imports.

Trump’s announcement over the weekend that he would impose a 10% tariff on imports from China—part of his plan to improve the US trade balance—prompted Beijing to retaliate by imposing a 15% tariff on US LNG and coal, as well as a 10% tariff on US oil. The US is the world’s largest LNG exporter, and China has been a key buyer of the super-cooled gas, importing about 6% of total US LNG exports last year—or approximately 4.3 million metric tonnes—according to LSEG data.

According to Reuters calculations, Chinese state-owned companies have signed LNG supply agreements for more than 20 million metric tonnes per annum (MTPA) from both existing and future US export terminals. Venture Global LNG and Cheniere, the two largest US LNG exporters, have secured long-term contracts with Chinese companies for 14 million MTPA, based on public statements.

Venture Global declined to respond to requests for comment, while Cheniere and its rival Energy Transfer—which has a long-term sales and purchase agreement with China—were not immediately available for comment. Freeport LNG, the third-largest US LNG exporter, also declined to comment.

Currently, there are eight operating LNG export terminals in the US, three under construction, and approximately 20 more in various stages of development. Companies are advancing projects for new or expanded LNG export capacity after the Trump administration lifted a moratorium on new LNG export permits in January. This moratorium had been imposed by former President Joe Biden due to concerns about the environmental and economic impacts of such projects.

However, Charlie Riedl, Executive Director of the Center for LNG—a trade group representing many US LNG exporters and developers—warned that China’s decision to impose tariffs introduces uncertainty to the industry and weakens America’s competitive position in global energy markets.

“These tariffs on US LNG directly undermine the Trump administration’s efforts to expand American energy exports and strengthen our geopolitical influence,” Riedl said.

Huge contracts

LNG developers rely on long-term contracts or sale and purchase agreements to secure financing from banks for their projects. These agreements are critical for moving projects from the development stage to the final investment decision.

According to company filings, Venture Global—the most valuable LNG exporter in the US, with two facilities operating in Louisiana and three under development—has signed 9.5 MTPA supply agreements with Chinese companies to date. Cheniere Energy, the second-largest LNG company in the US and currently the largest exporter, has more than 4.5 MTPA of long-term contracts with China.

In its prospectus for its blockbuster initial public offering in January, Venture Global warned investors about the potential risks posed by a trade war between the world’s two largest economies. “These factors could adversely affect our ability to market the remaining production capacity of our projects, which could have a material adverse effect on the viability of our projects and our business,” the company stated at the time.

On Tuesday, Venture Global’s shares fell nearly 5% in afternoon trading, while Cheniere’s stock dropped by less than 1%.