Chinese purchases of American oil and gas have fallen sharply in recent months
TRADE TALKS between America and China finally yielded some results. Mr Trump had been scheduled to raise tariffs on Chinese goods on March 2nd, but on Sunday he announced that he would be delaying the increase because talks between the two sides had been “productive”. He announced that a summit with Xi Jinping, China’s president, was in the works if “both sides make additional progress”.
The talks are being watched closely by American energy firms. America’s energy exports are a priority for Mr Trump, who is set on the United States transforming itself from a net importer to a net exporter of energy products, and “achieving energy dominance”.Cracking the Chinese market is a large part of this: China is the world’s largest importer of oil and second-biggest of natural gas.
In 2017 Mr Trump’s hope of turning America into an energy-exporting superpower seemed on track, at least by one measure. The value of American oil and gas exports to China rose almost five-fold year-on-year. Today, that looks more like a short-term spike. No sooner did China increase its purchases of American energy than Mr Trump declared a trade war, levying tariffs on a wide range of Chinese goods. China’s formal retaliation includes tariffs on LNG, although not crude.
Nonetheless, its imports of both fuels from America have dried up. From July to November last year the value of American oil and gas exports to China plunged from $1bn to $100m. Last autumn an Australian company delayed its decision to invest in a Louisiana gas-export terminal, citing problems securing Chinese buyers.
China has used imports of oil and gas as a bargaining tool, offering to increase purchases as part of any deal with America. If a trade war is averted, energy exporters will rejoice. The damage that they face is apparent from a report by BP, an oil company. It compared the impact of a future with “less globalisation” with a base scenario . Continuing trade wars could cause the growth in global GDP and energy demand to slow somewhat, resulting in a cumulative loss of 6% and 4.
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