In a surprising move, China has halted all LNG (Liquefied Natural Gas) imports from the United States. Cautious optimists like George Magnus were hoping that the opposite would happen, and that China would increase energy imports from the US in anticipation of a new trade deal that would ease tensions. Instead, what started out as a trade war is turning into a full-blown economic conflict that encompasses ever more areas.

The immediate fallout from Beijing’s move will be limited, since it imported only 3% of its gas needs from US ports. Preparing for a possible conflict, China has been diversifying its energy needs for decades, cloaking it as a climate-emergency environmental policy. As Bloomberg columnist Javier Blas observed: “China’s domestic oil production surged to an all-time high of ~4.5 million barrels per day”, showing that Beijing never planned to abandon fossil fuels but only its “foe’s fossil fuels.”

Beijing picked a good time to do so, because the world is moving towards a natural gas glut, with new sources of supply scheduled to come online in the very near future: Qatar, rich in affordable natural gas, is actively pursuing the development of the immense resources found in the South Pars/North Dome gas field, the largest gas deposit in the world. The nation is determined to take significant steps toward its advancement.

Globally, the natural gas market is undergoing remarkable growth and diversification, with countries like Canada, Russia, and Saudi Arabia making substantial investments in their gas field developments. Canada is expected to see the beginning of commercial shipments of natural gas from the new terminal in British Columbia in 2025. This, alongside the Arctic LNG-2 project launch in Russia and Saudi Arabia’s ambitious goal to double its gas production by 2030, signals a transformative shift in the global natural gas landscape.

The question, then, is not how much LNG will be available, but whether there will be too much, with suppliers desperate to find buyers and China being in the comfortable position of picking and choosing from whom to buy.

If energy was supposed to be a major policy tool in the eyes of Washington, its tariff strategy appears to be backfiring. The cancellation of US imports — although mostly symbolic at this point — is a clear sign of that. Ironically, as a consequence of the 2022 energy crisis, global markets in the energy sector have shifted in a very positive way for China, and Trump’s policies of weakening Opec through US shale producers are reinforcing this move. One thing, however, is clear: both sides appear more inclined towards escalation than de-escalation, and an intensifying conflict could raise prices for energy — and everything else.

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