Oil & Gas

The ongoing U.S.-China trade war has intensified as China imposes tariffs on American coal, oil, and liquefied natural gas (LNG) exports in response to U.S. trade policies. While crude oil and LNG make up only a small portion of China’s total imports, coal stands out as the most impacted sector. This move reflects China’s strategic targeting of the U.S. energy sector in the trade dispute, affecting global market dynamics.

China's decision to redirect LNG shipments to Europe and reduce U.S. crude oil imports by applying a 10% duty has already shifted trade patterns. However, coal is where the impact is most pronounced. The United States, a major coal exporter, shipped millions of tons to China, making it the country’s second-largest coal buyer in 2024. China’s move to seek tariff-free coal from other sources signals a shift that could reshape global energy trade routes.

In response, U.S. coal exporters are considering alternative markets, with India emerging as the most viable option. India, already a major coal importer, has been increasing its purchases of U.S. coal as part of a broader diversification strategy. At the same time, Australia, a long-standing coal supplier to China, could regain market share as U.S. coal exits. The redistribution of coal exports highlights the shifting alliances and economic recalibrations resulting from the tariff war.

While Mongolia is expected to increase coal exports to China by 20%, Russia faces logistical challenges such as high production costs and railway constraints, limiting its competitiveness. Canada and Australia stand to benefit as alternative suppliers, potentially replacing the U.S. in China’s coal market. This tariff dispute is not just about trade but about global energy power plays, reshaping supply chains and economic dependencies worldwide.