The Not-So-Surprising Commodity Excluded from China’s Tariff List

Photo: Wojciech Wrzesien / Shutterstock

By Ryan Collins (Bloomberg) — In punching back against U.S. tariffs, China included almost all energy-related commodities on a list of its retaliatory actions. The exception: liquefied natural gas.

That’s not surprising, according to a report Monday by Wood Mackenzie Ltd., a U.K.-based research firm. After an aggressive coal-to-gas switching policy was put in place by China’s government last year to fight the country’s smog issues, U.S. LNG supplied 4 percent of that country’s demand, the report said.

U.S. President Donald Trump announced $50 billion in tariffs against China on June 15, and China retaliated with a $34 billion list. Oil was included, but not LNG. The reason: China’s LNG demand will grow by 10 million tons this year, and 9 millions tons in 2019, the Wood Mackenzie report said. The U.S., meanwhile, is set to generate 30 percent of incremental supply growth in LNG.

“In the event of an escalation, LNG is likely to remain outside the bounds of any additional tariffs,” Nicholas Browne, head of Asia-Pacific gas and LNG at Wood Mackenzie, wrote in a note to clients. “Tariffs on U.S. LNG would increase costs and potentially limit availability of LNG.”

See Also: China Passes South Korea as World’s Second Biggest Gas Importer

While there are only two export facilities operating in the U.S., at least three more terminals could come online by this time next year. America is on the path to being the world’s largest supplier of the fuel, rivaling Australia and Qatar within five years.

The decision by China comes following a winter in which the country’s natural gas imports from Central Asia, a long-time source of the fuel via pipeline, slipped, worsening a winter shortage and increasing the world’s biggest energy user’s reliance on seaborne supplies.

Read Next: U.S. LNG to China: A Balance of Trade

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