In the most recent response to the ongoing trade war between the United States and China, Beijing says it is adding LNG from the United States to a list of proposed tariffs.  Also on Friday, Sinopec suspended US crude imports due to the dispute.  

Trade war sees China add tariffs on $60 billion in US goods

On Friday, China signalled that it is not backing down from the trade war with the Trump administration by including US liquified natural gas imports on a new proposed list of tariffs on $60 billion of goods from the United States.

The move by Beijing could hamper Trump’s ambition to make the US an energy exporting superpower.  The US government is looking to increase its fossil fuel exports to global allies while domestic agencies declaw US regulations on oil and gas production.

“The juxtaposition here is clear: it is hard to become an energy superpower when one of the biggest energy consumers in the world is raising barriers to consume that energy. It makes it very difficult,” Michael Cohen, head of energy markets research at Barclays told Reuters.

Along with the Chinese government’s announcement to slap a tariff on US LNG, Sinopec, the biggest buyer of US crude oil, says it is suspending US crude imports due to the trade war.

Kpler, which tracks worldwide shipments of crude oil, says US oil exports to China dropped to an estimated 226,000 barrels per day (b/d) in July, down from 445,000 b/d in March.

Currently, the United States is the world’s largest exporter of some fuels, including gasoline and diesel.  It is also set to become one of the largest exporters of LNG by 2019.  In 2017, US LNG exports were worth $3.3 billion.

The US also has a number of large-scale LNG export facilities under construction.  According to Reuters, tariffs may limit access to finance and secure buyers for the two dozen firms looking to build new LNG export terminals in the US.

“The US gas industry will be much harder hit by this as China imports only a small volume whereas US suppliers see China as a major future market,” Lin Boqiang, professor on energy studies at Xiamen University in China told Reuters.

China is the world’s largest importer of crude oil and became the second-largest importer of LNG in 2017.  Beijing is shifting its electricity production from coal-fired plants to natural gas facilities to reduce air pollution.

Between February 2016 and May 2018, China bought almost 14 per cent of all US LNG exported.  Since June, China has taken delivery from just one vessel that left the US and did not take any deliveries in July.

Eben Burnham-Snyder of Cheniere Energy Inc told Reuters “Cheniere continues to see China as an important growth market and LNG as a ‘win-win’ between the United States and China”

Burnham-Snyder added Cheniere does not see tariffs as productive.

In the past two months, Beijing has limited its imports of US LNG and Kpler says crude cargoes sailing for China have dropped off in recent months.

“This will not affect the trade but will simply make gas more expensive to Chinese consumers,” Charif Souki, chairman of Tellurian Inc told Reuters.  Tellurian is of a number of companies hoping to build a new LNG export terminal.

Neil Atkinson, head of the oil industry and markets division at the International Energy Agency says that if the tariffs cut into US crude exports to China, Beijing will likely purchase crude from Saudi Arabia, Russia, the United Arab Emirates and Iraq.