China's threats of new tariffs on $60 billion worth of U.S. imports will create shifts in the energy market, as American liquefied natural gas makes the list of goods Beijing will target, analysts said.
The move to include LNG raised eyebrows as China had previously held back at including the fuel on the list of products subject to tariffs. That is as the country looks to natural gas as part of its efforts to clean up politically sensitive air pollution.
But things have changed since trade tensions with the U.S. escalated dramatically in recent weeks and some have questioned if Beijing's move will hit American gas exports. The U.S. is the world's top producer of natural gas and is a growing major exporter of LNG.
If implemented, a tariff on LNG "would deal a serious blow to the U.S. gas industry and President (Donald) Trump's 'energy dominance' agenda," said Hugo Brennan, senior Asia analyst at consultancy Verisk Maplecroft.
"Chinese gas demand forecasts are underpinning a raft of proposed LNG export terminals along America's East Coast, which align with the Trump administration's bid to turn the U.S. into an energy superpower. But some of these projects will struggle to attract financing if (China) goes ahead and raises tariff barriers on U.S. LNG," Brennan wrote in a Tuesday note.
China was the world's second-largest importer of LNG last year. The country is expected to become the world's top importer of the super-chilled fuel next year, the International Energy Agency said in June. Last year, about 15 percent of U.S. LNG exports went to China.
The current standoff is a sharp shift from the situation earlier this year when Beijing offered to buy more U.S. energy exports to reduce the massive bilateral trade deficit.
Now, that "looks like a distant prospect, given that high-level talks have broken down against a backdrop of threats and counter-threat," said Brennan.
Still, there are analysts who counter that the U.S. gas export boom is something that cannot be stopped — with or without China.
Currently, most U.S. LNG exports are secured on long-term contacts, so the impact will be fairly limited until the deals expire. However, the spot LNG market — which has been growing steadily — will be hit. Longer term contract negotiations could also be affected.