Two years ago, Trump did not know what was LNG. Now, its tariffs could invalidate the industry



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US President Donald Trump made gestures during a rally at Lewis Center, Ohio, United States on Saturday, August 4, 2018. Trump defended his use of tariffs that exacerbated tensions with China and Europe. the hardball on the trade is "my thing." Photographer: Maddie McGarvey / Bloomberg

Donald Trump threatens to further increase tariffs on Chinese imports, which will spur the Asian nation to deliver on its own promises, including hitting US exports of liquefied natural gas and crude oil. Overall, China has said it will impose $ 60 billion on US products if Trump does not back down.

Trump has launched this war of words and China is determined to retaliate. After all, the United States has become one of the world's largest exporters of LNG and crude oil through its shale deposits and the advent of drilling technology known as hydraulic fracturing. At the same time, China becomes the world's largest importer of LNG, mainly because it is trying to replace its use of coal. But he can get this natural gas from other sources, like Russia or Qatar.

During the presidential campaign, Trump did not even know what LNG was. This may be the biggest irony of all, as fuel has become the backbone of US energy independence, as well as a key source for reducing global CO2 emissions in China and elsewhere.

The United States, according to the US Energy Information Administration, exported $ 3.3 billion of LNG in 2017. And next year, this country should be the world's largest exporter of this fuel.

The United States is already a major exporter, with the Cheniere facility in Louisiana shipping LNG to 11 different countries. China is expected to be the largest market with 400 billion cubic meters. It is also the same country that has the choice of buying not only its LNG but also its coal.

The commercial dispute undoubtedly touches others, including Sempra Energy's Cameron Project, Freeport LNG's facilities in Freeport, Texas, Dominion Energy's facilities at Cove Point and Southern California's Elba Island.

"Given the unreasonable demands of the United States, a trade war is an act that aims to crush China's economic sovereignty, by trying to force it to become an economic vassal in the United States," Global Times of China says in an editorial. "Given the huge Chinese market, its systemic advantage of being able to focus its resources on big projects, the tenacity of its people in the face of persistent hardship and its determination to implement policies of reform and openness, the country can survive a trade war. "

China has promised to charge 6,000 products made in the United States with tariffs. That's about two-thirds of what it imports. The editorial is a response to the Trump scandal aimed at raising the country's previous tariffs on Chinese-made products sent to the United States by 10% to 25%, for a total of $ 200 billion.

Turbulent companies

Forty-five business groups led by the American Chamber of Commerce& nbsp; They oppose tariffs and call them "particularly damaging", adding that they jeopardize "innovation". This decision should in fact benefit China's trading partners, who will fill the void left by US exporters. .

"It is unlikely that exports (of natural gas) will have a significant impact on the European and Asian markets currently served by Russia over the next decade," said Hill Huntington, Executive Director, & nbsp;Energy Modeling Forum, Stanford University, in a previous interview. "There are other sources in the Middle East and elsewhere that could be much more competitive with Russian supplies than US exports."

The president believes that other countries are blocking access to their markets while the country offers unhindered access to its consumers. Its US trade representative says that global trade rules allow each "sovereign country" to impose tariffs if they are judged in their national interest, even those of the world's most developed countries. Robert Lighthizer & nbsp; states that President Trump believes that tariffs applied to China are in the interest of "national security".

For its part, China says that the World Trade Organization has long allowed developing countries to impose higher tariffs to protect their domestic industries from international competition.

And what is important to remember from the American business world is that tariffs would do little to correct what the president says are unfair trade practices. In fact, it would increase prices for US consumers and businesses, especially electronics and clothing, a tax that would overturn recent US tax reform measures.

In total, the United States exported $ 1.3 trillion worth of manufactured goods, some of which could be threatened by tariffs. The gross domestic product would fall by $ 11 billion while the financial markets would be depressed, the US Chamber of Commerce said.

Tariffs "would ensure that foreign companies replace the markets that US companies, farmers and ranchers must release when China opposes US tariffs," the US Chamber of Commerce said.

Impetuous nature. Long term damage

Behind the scenes, companies believe that the US government is acting on a whim and the impetuous nature of the president. And while the president may believe in trade fairness, policies are temporary and will change with "political" circumstances. Quite simply, Trump wants to look like he has "won" and the content of the resolution is less about him.

Part of the American industrial and manufacturing community will be moving towards Shanghai in November to participate in an exhibition where Chinese President Xi Jinping will speak. Although their main concern at the moment is a trade war that would prevent them from increasing their presence in Asia, they are also concerned about China's energy and environmental policies, as well as their personal security. recently, a bomb was fired in front of the US embassy, ​​even if no one was injured, except for the man who blew him up. & nbsp;

China is committed to & nbsp;reduce reliance on coal& nbsp; – now represents 66% of its electricity production portfolio. His immediate goal, however, is & nbsp;reduce this percentage to 59%& nbsp; and increase the use of natural gas to 7.5%. US LNG producers could conquer this market, but the proposed tariffs threaten this market.

Meanwhile, Johnson & amp; Johnson and Wal-Mart have taken environmentally friendly positions and have tried to recruit their supply chains do the same, including in China. And China has responded by applying much stricter rules on air quality, not only to clean up its environment, but also to indulge in the global community.

Will the "trade war" and the resulting tariffs have a permanent effect on US-China relations? The rumors will continue for a while, but Trump will eventually give in – mainly because China hit the American heart that voted for Trump. And once he backs off, things will calm down.

Businesses, in general, believe that the Trump effect will be short-term – a more rational national leadership will eventually take over. The damage, however, could take years to repair, especially for the US LNG industry.

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US President Donald Trump made gestures during a rally at Lewis Center, Ohio, United States on Saturday, August 4, 2018. Trump defended his use of tariffs that exacerbated tensions with China and Europe. the hardball on the trade is "my thing". Photographer: Maddie McGarvey / Bloomberg

Donald Trump threatens to further increase tariffs on Chinese imports, which will spur the Asian nation to deliver on its own promises, including hitting US exports of liquefied natural gas and crude oil. Overall, China has said it will impose $ 60 billion on US products if Trump does not back down.

Trump has launched this war of words and China is determined to retaliate. After all, the United States has become one of the world's largest exporters of LNG and crude oil through its shale deposits and the advent of drilling technology known as hydraulic fracturing. At the same time, China becomes the world's largest importer of LNG, mainly because it is trying to replace its use of coal. But he can get this natural gas from other sources, like Russia or Qatar.

During the presidential campaign, Trump did not even know what LNG was. This may be the biggest irony of all, as fuel has become the backbone of US energy independence, as well as a key source for reducing global CO2 emissions in China and elsewhere.

According to the US Energy Information Administration, the United States exported $ 3.3 billion worth of LNG in 2017. Next year, the country is expected to be the world's largest exporter of this fuel.

The United States is already a major exporter, with the Cheniere facility in Louisiana shipping LNG to 11 different countries. China is expected to be the largest market with 400 billion cubic meters. It is also the same country that has the choice of buying not only its LNG but also its coal.

The commercial dispute undoubtedly touches others, including Sempra Energy's Cameron Project, Freeport LNG's facilities in Freeport, Texas, Dominion Energy's facilities at Cove Point and Southern California's Elba Island.

"Considering the unreasonable demands of the United States, a trade war is an act that aims to crush China's economic sovereignty, trying to force it to become an economic vassal in the United States," the Global Times said in a statement. editorial. "Given the huge Chinese market, its systemic advantage of being able to focus its resources on big projects, the tenacity of its people in the face of persistent hardship and its determination to implement policies of reform and openness, the country can survive a trade war. "

China has promised to charge 6,000 products made in the United States with tariffs. That's about two-thirds of what it imports. The editorial is a response to the Trump scandal aimed at raising the country's previous tariffs on Chinese-made products sent to the United States by 10% to 25%, for a total of $ 200 billion.

Turbulent companies

Forty-five business groups led by the US Chamber of Commerce oppose tariffs and call them "particularly damaging," adding that they jeopardize "innovation." This decision should actually benefit China's European trading partners, which enter and fill the void left by US exporters.

"It is unlikely that exports (of natural gas) will have a significant impact on the European and Asian markets currently served by Russia," said Hill Huntington, executive director of the Energy Modeling Forum of the University of Stanford, in an earlier interview, "There are other sources in the Middle East and elsewhere that could be much more competitive with Russian supplies than US exports."

The president believes that other countries are blocking access to their markets while the country offers unhindered access to its consumers. Its US trade representative says that global trade rules allow each "sovereign country" to impose tariffs if they are judged in their national interest, even those of the world's most developed countries. Robert Lighthizer says that President Trump believes that tariffs on China are in the interest of "national security".

For its part, China says that the World Trade Organization has long allowed developing countries to impose higher tariffs to protect their domestic industries from international competition.

And what is important to remember from the American business world is that tariffs would do little to correct what the president says are unfair trade practices. In fact, it would increase prices for US consumers and businesses, especially electronics and clothing, a tax that would overturn recent US tax reform measures.

In total, the United States exported $ 1.3 trillion worth of manufactured goods, some of which could be threatened by tariffs. The gross domestic product would fall by $ 11 billion while the financial markets would be depressed, the US Chamber of Commerce said.

Tariffs "would ensure that foreign companies replace the markets that US companies, farmers and ranchers must release when China opposes US tariffs," the US Chamber of Commerce said.

Impetuous nature. Long term damage

Behind the scenes, companies believe that the US government is acting on a whim and the impetuous nature of the president. And while the president may believe in trade fairness, policies are temporary and will change with "political" circumstances. Quite simply, Trump wants to look like he has "won" and the content of the resolution is less about him.

Part of US manufacturing and industry will travel to Shanghai in November to participate in an exhibition at which Chinese President Xi Jinping will speak. Although their main concern at the moment is a trade war that would prevent them from increasing their presence in Asia, they are also concerned about China's energy and environmental policies, as well as their personal security. Just recently, a bomb was unleashed in front of the US Embassy, ​​but no one was injured except for the man who set it off.

China is committed to reduce reliance on coal – now 66% of its electricity production portfolio. Its immediate objective, however, is to reduce this percentage to 59% and increase the use of natural gas to 7.5%. US LNG producers could conquer this market, but the proposed tariffs threaten this market.

At the same time, Johnson & Johnson and Wal-Mart have taken environmentally friendly positions and have tried to ensure that their supply chains do the same, including in China. And China has responded by applying much stricter rules on air quality, not only to clean up its environment, but also to indulge in the global community.

Will the "trade war" and the resulting tariffs have a permanent effect on US-China relations? The rumors will continue for a while, but Trump will eventually give in – mainly because China hit the American heart that voted for Trump. And once he backs off, things will calm down.

Businesses, in general, believe that the Trump effect will be short-term – a more rational national leadership will eventually take over. The damage, however, could take years to repair, especially for the US LNG industry.