Beijing imposed import tariffs of 15% on US coal and liquefied natural gas and 10% on crude oil earlier this month, shortly after Mr Trump imposed an additional 10% tariff on all imports from China.
China has only targeted energy imports because they are easy targets, even though oil and LNG make up only a small portion of China’s total imports.
The impact of Beijing and Washington’s tariffs is being felt immediately. Chinese energy traders have begun diverting LNG shipments to Europe. US crude oil exports to China will also be affected by the 10% tariff. However, some experts say the impact of the tariff “war” is most pronounced in the coal industry.
According to Clyde Russell, a writer for Reuters’ Asia commodities and energy section, US crude accounts for just 2% of China’s total crude imports, and LNG from Washington accounts for just 5%. Coal, however, is a different matter entirely.
The market is largely focused on the US’s position as the world’s largest producer of oil and gas and one of the top 10 exporters of these commodities. The US is also a major exporter of coal, shipping the material to more than 70 countries. As of 2023, China is the 5th largest importer of US coal, accounting for 6.46% of total exports. As of the third quarter of 2024, China received 3.675 million tons of US coal, making it the 2nd largest retail buyer of US coal after India.
That could now change as China looks elsewhere for tariff-free coal supplies and the US turns to its biggest customer, India. Earlier this month, Reuters quoted US government officials as saying they expected coal export flows to change, noting the trend could reduce Australia’s share of China’s coal import market.
Coking coal is a particularly hard hit export. Coking coal is used to make steel and the US exports a lot to China. Last year, US coking coal exports to China increased by about 33% to $1.84 billion, according to Reuters. Coal exports to India have also increased as the country seeks to diversify its supply away from its top supplier, Australia.
Russell said U.S. coal exporters could try to maintain market share in China by offering discounts. They could also pivot to India as China looks to other sources such as Mongolia and Russia. Chinese media reported that Mongolia will increase coal exports to the mainland by 20 percent this year, aiming to increase its total export capacity to 165 million tons.
However, Russia may not be a viable option after Russian coal exports to China fell sharply last year. According to Reuters, Russian coal is less competitive due to high production costs and a lack of rail capacity. That is, just as the US has few options for alternative export destinations, China has few options for alternative suppliers.
Canada is an exporter that could benefit from the tariff “war” like Australia, which could regain market share in China as US coal is diverted to India.
If China shifts to buying more Australian and possibly Canadian coking coal, it is likely that Australian coal prices will become more competitive with US prices, especially as US producers struggle to find replacement buyers for shipments that have been sent to China.
Source: Vietnam Insider