In the latest trade war tit-for-tat, China has included for the first time liquefied natural gas (LNG) in its list of goods up for a potential 25-percent import tariff, should the United States impose additional tariffs on Chinese imports.
As the U.S.-China trade spat turns into a full-blown war with tariffs and retaliatory tariffs and threats of further tariffs, U.S. energy exports to China may suffer if Beijing follows through with its threat to slap tariffs on U.S. oil and oil product imports.
Up until Friday, China had excluded LNG from the goods that it would hit with an import tariff in retaliation for a possible new U.S. round of tariffs on Chinese goods.
The Friday statement from the Chinese commerce ministry has already had Chinese LNG end-users and suppliers saying that they would likely deter spot procurement of U.S. LNG cargoes in the near term if the tariff comes into effect.
“[A] 25% [tariff] is not something we can absorb even if domestic demand is strong,” a source at a state-owned Chinese company told Platts on Monday.
“So while this uncertainty persists, I doubt buyers will be buying a lot of spot US LNG.”
For private Chinese companies, a possible 25-percent tariff on LNG imports from the U.S. would completely eat away their margin, and would keep them from being able to afford the cost of importing spot U.S. LNG cargoes in the near term.
According to S&P Global Platts Analytics data, China’s imports of U.S. LNG jumped to more than 1.88 million mt in January to July 2018 alone, up from 1.61 million mt in all of 2017.
Yet Chinese imports have declined over the past two months with just four cargoes in June and July versus five cargoes shipped in May alone, according to S&P Global Platts.