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The U.S. liquefied natural gas (LNG) industry had been on the upswing since mid-January thanks to strong support for natural gas production and exports from the new Trump administration. But the long-term future looks suddenly uncertain as the White House announced “reciprocal tariffs” in early April, eliciting retaliatory tariffs from China and igniting a trade war. A combination of very high tariff rates and the strong post-winter demand by the European Union to refill its gas storage has driven Chinese buyers to take advantage of the destination flexibility that U.S. LNG cargoes generally entail, rerouting shipments to non-Chinese markets. No U.S. LNG cargo has reached China since early February. A few factors suggest that the current halt in U.S. LNG shipments may set off a key shift in the energy economic ties between the world’s largest LNG importer and exporter.
The U.S. Department of Energy has green-lighted five LNG-related projects since the Trump administration signaled strong support for LNG exports on the first day of his presidency. The policy change led to export authorization for several projects that seek to export to non–Free Trade Agreement countries, such as Japan and China.
Such projects involving Chinese buyers were beginning to symbolize the ascent of LNG trade as an area of mutual gain in the bilateral economic tie that has otherwise become contentious and confrontational over issues such as China’s manufacturing overcapacity. Since the first contract was signed in 2018, Chinese buyers and U.S. suppliers have signed over 20 long-term contracts (LTCs). Among them, six LTC totaling 8.5 million tons per annum (mtpa) are tied to projects that are now online, while projects with another 11.5 mtpa worth of contracted volume await the completion of construction. Moreover, six additional LTC totaling 7.1 mtpa are associated with planned projects—either new or expansion. Among those, both Calcasieu Pass 2 LNG and Lake Charles LNG remain under the review of the Federal Energy Regulatory Commission while they strive to reach the Final Investment Decision this year. Notably, the Chinese contracts associated with these under-construction and planned projects are set to run for 20 years or longer—which is longer than many of the earlier U.S.-Chinese LNG contracts and conforms to a typical duration of long-term LNG contracts.
As more projects come online, the U.S.-China LNG trade looks destined to grow, expanding the limited role each country currently has in the other’s LNG market. For example, in 2024, U.S. supply accounted for only 5 percent of China’s LNG imports, while China represented 5 percent of U.S. LNG exports. While much uncertainty looms, if the Chinese LNG demand is to grow by another 40 mtpa by 2030, the total contracted volume of 27.1 mtpa would position the United States to be a major source for China, accounting for about a quarter of the Chinese LNG market if all U.S. cargoes are to arrive in China. The prospect of the U.S. capturing this market is now in doubt, however, as LNG is caught up in the spiraling trade war between the two countries, in which U.S. LNG is subject to a 125 percent tariff rate as of early April.
The immediate effect has been a halt in U.S. LNG shipments to China, as Chinese buyers seek alternative destinations for prepurchased cargoes to avoid the prohibitively high 125 percent cumulative tariff rate. These reroutings are made possible by the destination flexibility provision, which is the key contractual feature in LNG supplies from Lower 48 export projects. Because of the destination flexibility, in fact, the Chinese buyers might choose to continue rerouting the U.S.-origin shipments elsewhere rather than breaking their contractual obligations for some years to come.
This is not the first time that U.S. LNG has stopped reaching Chinese shores. Yet, it’s far from certain that this is only a temporary repeat of the 13-month freeze caused by the 25 percent tariffs on U.S. LNG during the height of the bilateral trade war in the 2018–2019 timeframe. The current freeze in bilateral LNG trade may raise commercial, economic, and geoeconomic implications.
First, the freeze casts a major doubt over the viability of LNG trade as an important venue to reduce the U.S. trade deficit with China. During the previous round of bilateral tension in the late 2010s, Beijing pledged to import $52.4 billion worth of U.S. fossil fuels, such as LNG and oil, through the end of 2021. The wave of LTC made since then was on the verge of creating robust LNG trade between the two countries, enabling China to make progress on the unfulfilled pledge.
Also, the freeze may jump start the beginning of a sustained shift away from U.S. LNG even while China’s natural gas import dependence grows despite efforts to increase its domestic gas production. Natural gas is used for heating and cooking, as well as the production of chemicals that are used to manufacture fertilizers and plastics. China’s net gas import level has been rising, now accounting for about one-third of its domestic consumption.
Many gas-producing countries are eying to expand presence in the Chinese market, which has become the world’s largest LNG importer since 2023. In 2023, China’s LNG imports increased by 13 percent year over year, to 69.6 mtpa. The United States is far from the dominant supply source today. Leading LNG exporters to China include Australia (34 percent of total LNG imports), Qatar (23 percent), Russia (11 percent), and Malaysia (10 percent). Moreover, unlike many other top LNG-importing countries, China also imports natural gas by pipeline. Leading pipeline gas exporters to China include Turkmenistan, Russia, and Myanmar. As the 38 billion cubic meters per year (28 mtpa) capacity “Power of Siberia 1” pipeline ramps up to full production, China’s pipeline gas imports from Russia are on the rise. Moreover, China’s desire to reduce import reliance on U.S. LNG might prompt Beijing to more proactively consider reaching an agreement on the “Power of Siberia 2,” a proposed project with a full capacity of 50 billion cubic meters per year (36.4 mtpa) that Moscow is eager to steal. Gas trade expansion—pipeline and LNG—could further the geoeconomic ties between China and Russia and displace the opportunities for U.S. market share in China’s gas supply.
Only time will tell whether Chinese buyers will sign additional long-term LNG contracts with U.S. suppliers ever again. A more fundamental question for U.S. policymakers is how much the geo-economic value of U.S. LNG may diminish—whether as a lever for Washinton to influence Beijing or as an energy security asset to aid allies in need—if the halt becomes permanent and significantly alters the global LNG flow, elevating the influence of other key global suppliers, such as Russia, Qatar, and Iran.
Jane Nakano is a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
