A U.S. Coast Guard response boat accompanies a liquefied natural gas tanker as it is moored to a pier. (U.S. Navy photo by Petty Officer 2nd Class Luke Pinneo)
Keep Your Enemies Closer? Trump’s LNG Strategy Benefits China Most of All
This week, U.S. liquefied natural gas (LNG) became one of the first American commodities impacted by a renewed round of U.S.-China trade and export controls. Following President Donald Trump’s February 1st order to impose tariffs on all Chinese imports, Beijing announced retaliatory levies on several American goods, including LNG. Though initial levies are modest, worsening U.S.-China trade relations may jeopardize Trump’s synonymous promises to greatly increase LNG exports elsewhere. For these new tariffs to be worth their cost, the Trump administration must ensure that LNG sales are preferential to U.S. companies and do not increase China’s political leverage.
In January 2024, concerns built over years of unprecedented U.S. fossil fuel exports led U.S. President Joe Biden to pause new LNG export approvals to non-free trade agreement nations (a decision recently overturned by the Trump administration). The pause granted time for the Department of Energy to draft a comprehensive analysis of the current export trajectory, which concluded that increasing exports raised domestic electricity prices, manufacturing costs, and greenhouse gas emissions with no significant boost to profits or global demand.
The report also highlighted politically risky deals between U.S. exporters and foreign firms, including a $43 billion agreement between Chinese state oil giant Sinopec and Alaska Gasline Development Corp. that would have put Chinese engineers and infrastructure—and, potentially, CCP surveillance equipment—in the geostrategic Arctic Circle. While that deal (and several others) fell through due to the project’s poor projected return on investment, a recent executive order from Washington aims to reinvigorate the Alaska LNG project with a new buyer.
While expanding Chinese infrastructure at home is a clear national security risk, Beijing doesn’t need domestic installations to exploit the U.S. LNG industry. Its position as the world’s top LNG importer gives it strategic leverage over private sector fossil fuel companies, which it uses to purchase U.S. LNG at rock-bottom prices and resell it at a premium during periods of regional energy insecurity. Up to 70% of U.S. LNG exports flow to multinational energy companies, like bp and Exxonmobile, that compete with each other for access to Chinese markets. If U.S. LNG exports expand, firms owned by or partnered with China will gain more power—damaging the profitability of U.S. domestic energy producers and exacerbating energy insecurity in developing nations.
Given that U.S. LNG export capacity is expected to rise regardless of these risks, deals must be struck to improve Washington’s political leverage while furthering its energy ambitions. Several Republicans, including former House Science Committee Chair Frank Lucas, advocate for “addicting” China to U.S. LNG and then using this trade dependence as leverage in national security negotiations. While compelling, this would require Washington to convince domestic oil and gas companies—and their multinational partners—to agree to adjust prices or curb exports to China for national security purposes.
With LNG exports contributing an estimated $400 billion to the U.S. economy, Washington may not have enough bargaining power to convince multinationals to sacrifice profits to “beat China.” Such a deal between industry and government would be difficult, even for the so-called Deal-Maker-in-Chief. Depending on the Trump administration’s willingness to make economic tradeoffs, legislation could be introduced to prohibit U.S. LNG producers from signing predatory contracts with Chinese importers or collaborating with China-linked gas traders. However, this would need to be done with surgical precision. Cutting U.S. gas exports to the world’s largest importer too rapidly could trigger a domestic oversupply shock and allow Middle Eastern companies to seize contracts previously held by U.S. and allied competitors.
The U.S.-China LNG relationship is already changing as tensions and tariffs rise, but the consequences are still uncertain. With Beijing’s levies on U.S. LNG in effect, Chinese companies may be less likely to make spot purchases of U.S. LNG but will likely continue making long-term contracts. Regardless of whether China lowers its purchasing, new buyers of U.S. LNG are urgently needed to absorb the expected rise in exports over Trump’s second term. European LNG demand is expected to drop 37% by 2030, and while demand declines in South Korea and Japan are less significant, their proximity to China require continuously competitive U.S. export prices and volumes. In the best-case scenario, the Trump administration will convince Europe, Japan, and South Korea to take on increased LNG exports without significantly sacrificing U.S. profitability. Washington should also strike deals with new partners in Latin America and the Caribbean, where gas demand is high and shipping costs are low.
Any moves to delay the projected global decline in LNG demand, however, are a temporary life support—not a route towards fossil fuel revival. If the administration can’t get U.S. firms and allies on board, the next four years could see America handing over billions of dollars of subsidized LNG to China—or, worse, a global gas market crash in the case of a U.S.-China supply cut. The Trump administration’s strategy has often been to “keep its enemies closer,” but in the case of LNG, keeping China close is more of a risk than a reward.
