Donald Trump’s global tariffs war is leading China to secure more of its energy needs from Russia at the expense of American markets, it has emerged. Beijing hasn’t imported any LNG from the United States for more than 10 weeks, with one container vessel bound for China redirected to Bangladesh after it failed to arrive before Beijing imposed a 15% tariff on US LNG on February 10. The subsequent decision to impose an additional 34% tariff on LNG in response to a similar move by the US President has effectively made US gas uneconomic for Chinese buyers.
China had already been re-selling US LNG imports to Europe, and has now said it would look to Moscow to plug the gap created by its tariff war with the US. This would offer Vladimir Putin a vital boost to his struggling wartime economy. “So many buyers are asking the embassy to help establish contacts with Russian suppliers, I think there will definitely be more imports,” said Zhang Hanhui, China’s ambassador to Moscow, on Wednesday.
With Russia already China’s third-largest LNG supplier after Australia and Qatar, he confirmed that real progress was being made on the idea of a new Power of Siberia-2 gas pipeline project.
Russia has been seeking a deal with Beijing for years to build a pipeline capable of carrying 50 billion cubic metres of natural gas a year from the Yamal region in northern Russia to China via Mongolia.
But, so far, the countries have not been able to agree on the terms of gas deliveries. This may be changing.
It is not the first time the US and China have locked horns on LNG, with a freeze lasting more than a year during Donald Trump’s first term in office.
But that was before the war in Ukraine, which saw Beijing reduce the amount of LNG it wanted to buy from the US.
Last year, only 6% of China’s LNG came from the US, down from a peak of 11% in 2021.
Meanwhile, Moscow has been enjoying a steady increase, with Russian LNG exports to China rising by 3.3% last year to 8.3 million metric tons.
Gillian Boccara, an analyst at Kpler, told the FT: “The last time this happened, there was a complete hiatus until the Chinese authorities granted waivers to companies, but that was at a time when gas demand was booming.
“Now we are looking at lower economic growth, and we think the Chinese can withstand the loss of these cargoes for quite a long time.”
And this latest impasse between Washington and Beijing could have lasting effects.
“There will be long-term consequences,” said Anne-Sophie Corbeau, a gas specialist at Columbia University’s Centre on Global Energy Policy. “I do not think Chinese LNG importers will ever contract any new US LNG.”
In the meantime, large US LNG projects across America underwritten by contracts with Chinese energy giants such as PetroChina and Sinopec, have been left in limbo. Most of these contracts were due to last 13 years, but others had a horizon of 2049.
“With tariffs rising to the level where they are an effective embargo, we will see a reshuffling of trade flows,” said Richard Bronze, at Energy Aspects, an energy consultancy.
He added: “We also expect Asia demand to fall by 5- 10 million tonnes as a whole. That should bring gas prices down a bit in Europe.”
