China is moving away: American LNG expansion plans disentangle as the trade war increases

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Last update on: April 18, 2025, 12:19 p.m.

China has just suspended all LNG imports from the United States. No warning, no phase, just an apparent state directive according to which Chinese buyers, including national oil companies, should no longer sign, lift or receive American liquefied natural gas. The decision comes in the wake of a rapid growing trade war, revived by a second presidency of Trump which has not waste time imposing new steep prices on Chinese technologies and industrial goods. The result is a gaping hole in the American LNG export market, which undermines years of investment hypotheses and exposes the growing fragility of fossil fuel infrastructure in a changing geopolitical landscape.

The China – Us Gnl relationship was not always an opponent. In fact, over the past decade, it was one of the most dynamic components of world gas trade. After the United States began to export LNG from the 48 lower states in 2016, China quickly became a high-level customer. That year, American LNG expeditions to China totaled around 0.35 million tonnes – small, but significant for a market at the opening. In 2017, the figure had reached more than 2 million tonnes per year (MTPA), China representing almost 15% of all American LNG exports. It looked at the start of a long and profitable relationship.

But the trade war launched in 2018 by the first Trump administration slammed the brakes. China has imposed reprisal prices on American LNG – 10%, then 25% – and imports dropped to almost zero by 2019. Only the phase trade agreement one early 2020 has restarted the flows. That year, American LNG volumes to China brought more than 4 million tonnes, switching to a record of 9.3 MTPA in 2021. During this year, China represented more than 12% of the total American LNG exports, and transactions were worth more than $ 3.4 billion in nominal dollars. Dozens of long -term contracts have been signed and developers of American projects counted on China to take out a future expansion.

This faith has proven to be lost. By 2022, American LNG flows to China have dropped sharply while Europe, in shock from the Russian War in Ukraine, will tender aggressively on the cargoes. Chinese imports oscillated around 2 MTPA in 2022 and increased modestly in 2023, but never recovered at their peak of 2021. Now, with the steep pekin suspension of American LNG, the relationship has completely collapsed. The contracts are frozen. The already loaded cargoes are being detour. And any terminal having an exposure to the decapion to Chinese buyers faces the real prospect of defect or renegotiation. In a few weeks, a decade of growth was reversed.

The loss of China as a customer comes as the US LNG industry still sails the role of change in Europe. Europe has become the largest destination for American LNG almost overnight after 2022, when the gas from the Russian pipeline was cut and European countries rushed for replacements. The American export volumes to Europe reached more than 60% of total expeditions at the beginning of 2023, from countries like France, the Netherlands and the United Kingdom based on American LNG to maintain the walking industries and heated houses.

But this wave has never been supposed to last. European climate policy has been explicit: to reduce dependence on fossil fuels in all sectors. The adjustment of the European Union for the pack of 55 and the Rewereeu strategy aim to reduce the use of natural gas up to 40% by 2030. Heat pumps, construction renovations, renewable energies and the integration of the grid are all faster than expected. The industry is electrifying. Hydrogen, although threshing media, played its role as a catalyst for decarbonization in political debates. As early as 2024, prospective European public services began to reduce 20 -year LNG transactions, in favor of short -term contracts or portfolio purchases. The message was clear: European gas demand culminated and would soon be in structural decline.

This left the US LNG sector spent on a delicate two -legged stool: China and Europe. And now a leg has been expelled under it.

More than 20 proposed American LNG terminals can be found at various stages of development. Some, such as the CP2 of Global Venture, the Arthur port of Sempra and the Rio Grande de Nextdecade, have already obtained partial funding or started an early construction. Others remain in the license and procurement phase, pending the final investment decision (FID). Through the Gulf Coast, the vision has been consistent: strengthening more capacity, serving growing Asian demand and using flexible destination clauses to capitalize on European price peaks.

In a series of publications in the past three years, I argued that this expansion was at best speculative. The hypotheses behind the next 100 MTPA capacity MTPA were trembling: this global demand would continue to increase, that geopolitics would remain stable, that carbon prices would not bite and that markets like China and India would buy everything that the United States sold. I pointed out that most of these new terminals were justified at the rear of long -term contracts which would not resist a meticulous examination, and that a large share of the planned capacity was likely to block as demand or decrease. Now these warnings are materialized.

The implications for these terminals are serious. Without Chinese derogation, almost a third of the volume engaged in future American projects has evaporated. Some developers will try to resell this capacity, but few buyers have the appetite for China, the credit profile or the desire to sign agreements of 20 years. With Europe capping the growth in long -term gas infrastructure and the preparation of a long -term drop in fossil imports, the second emergency market is slowly shrinking. Projects that have not yet reached FID can be fully set aside. Banks and institutional investors will require more conservative projections. Risk premiums will increase. Insurance can become more difficult to obtain. Terminals’ use rates will not be modeled expectations, and the entire GLF Coast GNL economy will have to be revisited.

There will always be a request for American LNG, but not on the scale on which the industry was betting. Flexible cargoes will find a house on small markets. Wallet players like Shell and Total will optimize flows. But the dream of becoming LNG pump jack in the world, offering inexpensive gas in a hungry world in the 2040s, now dissolves while industry wakes up to the new emerging reality. The future is not infinite growth. It is the managed decline, intelligent optimization and fewer new megaprojects.

Each large American LNG export terminal consumes between 3 and 8 terawatt hours (TWH) of energy per year, mainly in the form of natural gas used to supply compression and liquefaction. This is roughly equivalent to the annual electricity consumption of a medium -sized American city. In terms of greenhouse gases, a fully operational LNG terminal can issue more than 2 million tonnes of CO₂ per year, not to mention the emissions downstream of combustion or an upstream methane leak.

Ironically, Trump’s trade war – freezing the expeditions linked to China and interrupting the new terminal progress – may have delivered an unexpected climate silver lining: a substantial brake on future emissions from the fossil gas infrastructure which would be used otherwise in decades of high carbon export activity. By trying to punish a geopolitical rival, he accidentally slowed down the expansion of one of the sectors of the most high intensity of American emissions.

The final irony is political. US oil and gas leaders have passed a lot during the 2024 electoral cycle, again supporting Trump in the hope of favorable policies, more cowardly regulations and exports of accelerated fossil fuels. Billions have been spent on lobbying, campaign donations and friendly media to amplify the message that fossil fuels meant freedom and prosperity.

And what did they get in return? A trade war that closed its second largest LNG market, destabilized long -term supply relations and sent shock waves thanks to global energy funding. The ban on the approval of new terminals may have been lifted, but that does not mean that everything will be built. Just as in 2019, the industry helped buy the presidency, and once again, was burned by the man as they put in office.