Steel can make up nearly a third of an LNG terminal's pricetag, so the new levies could push up costs and push back start-up dates, writes Xiaoyi Deng
US president Donald Trump's volatile tariff policy and some of the countermeasures already announced by large trade partners are unlikely to cause any direct disruption to global gas markets. But they will have a direct impact on future US liquefaction capacity. And the indirect effects on gas supply and demand could be huge, stemming from a weaker macroeconomic outlook, fuel substitution and inflationary pressures on infrastructure development.
US LNG developers hailed Trump's return to office, after complaining that his predecessor complicated the issuance of additional export licences. But Trump's imposition of 25pc tariffs on all foreign-sourced steel and aluminum, from 12 March, will increase infrastructure costs in the US' upstream and midstream sectors. These present an immediate risk for US LNG developers, particularly for the five projects under construction and the six others expected to reach final investment decisions (FIDs) this year.
Metals account for up to 30pc of the cost of an LNG export plant. A terminal can cost $5bn-25bn to build, depending on its size, with steel used for pipelines, tanks and other structural frameworks. Facilities can be built using some domestically produced metal, but higher prices for this might lead to construction and FID delays for the country's planned liquefaction projects.
US tariffs' primary effect on the domestic gas market stems from duties levied on non-energy goods used by the oil and gas industry, including steel and specialised pipeline components such as valves and compressors, which are imported. The US remains a net natural gas importer from Canada, but these flows are unlikely to be affected by trade tariffs, given the lack of alternative supply sources available to some northern US states.
Tariff baiting
Trump's latest tariff round, unveiled on 2 April, involves a a minimum 10pc on all foreign imports from 5 April,with much higher tariffs on selected countries that briefly came into force on 9 April, before Trump bowed to panic in financial markets and announced a 90-day pause. China is the key exception. It has announced retaliatory tariffs that could disrupt US energy exports, resulting in an escalation that leaves the overall levy at 145pc in the US and 125pc in China.
China had already stopped importing US LNG earlier this year. But disruption to trade between the world's two largest economies may weigh heavily on manufacturing activity in China, in turn reducing industrial gas demand. And the ripple effects of disruption to US LPG exports to China may alter fuel-switching economics in the region and beyond.
Most other countries in Asia-Pacific have opted not to follow China's lead by retaliating. The Japanese government intends to negotiate a better tariff deal and is considering investing in the US' proposed 20mn t/yr Alaska LNG export project as part of wider efforts to reduce its trade surplus with the US. Countries in Asia-Pacific have been hit with some of the highest of Trump's targeted duties.
The EU is keeping retaliatory measures on the table, but these are unlikely to involve US LNG. Europe has become much more reliant on LNG imports after losing the bulk of its Russian pipeline supply, and imposing tariffs on energy imports would only reignite inflationary pressures that European countries have tried to curb over the past three years. The bloc says it is ready to negotiate on possibly increasing its US LNG imports to reduce its trade surplus and would axe tariffs on industrial imports if the US agrees to do the same. But Trump says this is not enough, citing the EU's upcoming Carbon Border Adjustment Mechanism as one of the "unfair trade practices" that justifies a tariff response.
| US LNG project pipeline | mn t/yr | |
| Project | Capacity | Expected start/FID |
| Under construction | ||
| Plaquemines | 19.2 | 2025 |
| Corpus Christi stage 3 | 12.0 | 2025 |
| Golden Pass | 18.1 | 2026 |
| Rio Grande | 17.6 | 2027 |
| Port Arthur | 13.5 | 2027 |
| Waiting for final investment decision | ||
| Delfin FLNG 1 | 13.2 | mid-2025 |
| Texas LNG | 4.0 | 2025 |
| Calcasieu Pass 2 | 28.0 | mid-2025 |
| Corpus Christi train 8-9 | 3.3 | 2025 |
| Louisiana LNG | 16.5 | mid-2025 |
| Cameron train 4 | 6.8 | mid-2025 |
