Nat Gas Daily Brief: Trump Tariffs 2/10/25

There has been a great deal of talks about Trump Tariffs and the effect on the NG market. While my personal belief is that Trump is following his personal dictum, which he laid out in his 1989 book "Art of the Deal". This is not a belief or endorsement for the Trumpster, just an observation through his own words and actions. The issue is China and the overall tariffs, which were announced last week. While Mexico and China have negotiated a hold on the imposed tariffs, it was funny to see that energy had a different regime in the percent being levied. Trump’s executive order on tariffs on Chinese products is a blanket 10 percent tax on everything coming in from the country. His proposed plans for Canada and Mexico are similarly broad: everything imported into the US from these countries would get a 25 percent tax applied, except for Canadian oil, which would be pegged at 10 percent. Funny how energy products were treated differently! The expectation is a tit-for-tat retaliation from the exporting nations. The US is currently the number four exporter of Oil, the number one exporter of NG, and number four exporter of coal. While China is the number one importer of oil (US #2), Japan the number one importer of NG (US #7), and China the number one of coal (US statistically >1%). The United States is the world's second-largest producer of energy. It produces 16% of the world's energy, about three-fourths as much as China. Since 2019, the country has been a net exporter of energy. In 2023, 102.8 quads were produced and net exports were 7.6% of production. On an energy content basis, even though U.S. total energy imports increased by about 1% in 2023, U.S. total energy exports were the highest on record, at about 29.50 quadrillion British thermal units (quads), and increased by about 8% from 2022. Total energy exports exceeded total energy imports by about 7.80 quads, the largest annual margin on record. So needless to say, energy is a big business for the US. For the most current data, the US exported 26.8B dollars of energy in November of 2024. With growth averaging 1.5%/year.
So, Trumps proposed tariffs would only effect the large amount of Canadian oil flowing into the US. Trumps initial tariffs show that he is separating energy from overall imported goods, because of the large energy exports the US sends abroad. Most nations understand the inflationary effect of energy on their overall economies. Energy accounts for 13% (just under 7 trillion US$) of world wide GDP. This places energy second to health care expenditures in many countries; and in some cases first.
So the long winded point to this post, is that the effect of the tariffs on NG prices are a red herring. We can see from the charts above that in 2024 China's imports of LNG is the lowest it has been in six year. Mainly due to the decrease in economic output due to the slowing Chinese economy, but more likely the new NG pipeline the "Pride of Siberia", which opened up this past summer. China has in fact been reselling its NG cargo to Europe on the spot market for the majority of 2024. And id predicted to continue doing so with the remaining contracted shipment scheduled for 2025.
Europe NG storage is at the lowest levels since the beginning of the Ukraine war. Although Europe is still receiving Russian NG, the shutting of the Ukraine transit deal on New Year's day, it will be interesting to see the Russian percentage of European supply when EuroStat numbers are release in March. The sanctions levied by Biden on Insurance carriers for shadow fleet carries of Russian LNG have not been repealed by Trump, which is expected to dramatically reduce supply also. With European storage at 53%, a colder European continent forecasted for the next two-three weeks, and the European mandate for storage levels to reach a predetermined level (70%) by May, this looks very healthy for the US LNG market, tariffs or no tariffs.
In Trump's 1989 book, "The Art of the Deal", he has some quotes which can be seen in how he is negotiating today with other governments and their economies. (I am in no way in support or against any of these quotes, only using his own words to make a judgement on what he might possible do going forward.) Quote #1 - "I aim very high and then I just keep pushing and pushing and pushing to get what I’m after. Sometimes I settle for less than I thought but I still end up with what I want." Quote # 2 - "It’s been said that I believe in the power of positive thinking. In fact, I believe in the power of negative thinking. I happen to be very conservative in business. I always go into the deal anticipating the worst. If you plan for the worst—if you can live with the worst—the good will always take care of itself." But the most poignant point in his book is about getting leverage. He states that you must provide something others want.
Trump says that "if the other party realizes how badly you want something, you’re dead.
The best place to negotiate is from a position of strength, and you get that with leverage.
Leverage means to have something the other party wants. Or better yet, needs. Or, best of all, simply can’t do without. That’s not always the case of course, and that’s where imagination and salesmanship come in: convincing the other party it’s in his best interest to make the deal."