China Walks Away: U.S. LNG Expansion Plans Unravel as Trade War Escalates

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Last Updated on: 18th April 2025, 12:19 pm

China has just suspended all LNG imports from the United States. No warning, no phasedown, just an apparent state directive that Chinese buyers, including the national oil companies, were no longer to sign, lift, or receive U.S. liquefied natural gas. The decision comes in the wake of a rapidly escalating trade war, reignited by a second Trump presidency that wasted no time imposing steep new tariffs on Chinese technology and industrial goods. The result is a gaping hole in the U.S. LNG export market, one that undermines years of investment assumptions and exposes the growing fragility of fossil fuel infrastructure in a changing geopolitical landscape.

The China–U.S. LNG relationship wasn’t always adversarial. In fact, over the past decade, it was one of the more dynamic components of global gas trade. After the U.S. began exporting LNG from the Lower 48 states in 2016, China quickly emerged as a top customer. That year, U.S. LNG shipments to China totaled roughly 0.35 million tonnes — small, but significant for a market just opening. By 2017, the figure had surged to over 2 million tonnes per annum (MTPA), with China accounting for nearly 15% of all U.S. LNG exports. It looked like the start of a long and profitable relationship.

But the trade war launched in 2018 by the first Trump administration slammed on the brakes. China imposed retaliatory tariffs on U.S. LNG — first 10%, then 25% — and imports plummeted to near zero by 2019. Only the Phase One trade agreement in early 2020 restarted flows. That year, U.S. LNG volumes to China rebounded to over 4 million tonnes, rising to a record 9.3 MTPA in 2021. In that banner year, China represented over 12% of total U.S. LNG exports, and the deals were worth over $3.4 billion in nominal dollars. Dozens of long-term contracts were signed, and U.S. project developers counted on China to underwrite future expansion.

That faith proved misplaced. By 2022, U.S. LNG flows to China dropped sharply as Europe, reeling from Russia’s war in Ukraine, bid aggressively on spot cargoes. Chinese imports hovered around 2 MTPA in 2022 and rose modestly in 2023, but never recovered to their 2021 peak. Now, with Beijing’s abrupt suspension of U.S. LNG, the relationship has collapsed entirely. Contracts are frozen. Cargoes already loaded are being diverted. And any terminal with offtake exposure to Chinese buyers is facing the real prospect of default or renegotiation. In just a few weeks, a decade of growth has been reversed.

The loss of China as a customer comes as the U.S. LNG industry is still navigating Europe’s shifting role. Europe became the largest destination for U.S. LNG almost overnight after 2022, when Russian pipeline gas was cut off and European countries scrambled for replacements. U.S. export volumes to Europe surged to over 60% of total shipments in early 2023, with countries like France, the Netherlands, and the UK relying on American LNG to keep industries running and homes heated.

But that surge was never meant to last. Europe’s climate policy has been explicit: reduce fossil fuel dependence across all sectors. The European Union’s Fit for 55 package and REPowerEU strategy aim to cut natural gas use by as much as 40% by 2030. Heat pumps, building retrofits, renewables, and grid integration are all scaling faster than expected. Industry is electrifying. Hydrogen, while mostly hype, has served its role as a decarbonization catalyst in policy debates. As early as 2024, forward-looking European utilities began declining 20-year LNG deals, instead favoring short-term contracts or portfolio purchases. The message was clear: European gas demand was peaking and would soon be in structural decline.

That left the U.S. LNG sector reliant on a delicate two-legged stool: China and Europe. And now one leg has been kicked out from under it.

Over 20 proposed U.S. LNG terminals are in various stages of development. Some, like Venture Global’s CP2, Sempra’s Port Arthur, and NextDecade’s Rio Grande, have already secured partial financing or begun early construction. Others remain in the permitting and contracting phase, awaiting final investment decision (FID). Across the Gulf Coast, the vision has been consistent: build more capacity, serve growing Asian demand, and use flexible destination clauses to capitalize on European price spikes.

In a series of publications over the past three years, I’ve argued that this expansion was speculative at best. The assumptions behind the next 100 MTPA of capacity were shaky: that global demand would continue rising, that geopolitics would remain stable, that carbon pricing wouldn’t bite, and that markets like China and India would buy whatever the U.S. was selling. I’ve pointed out that most of these new terminals were being justified on the back of long-term contracts that wouldn’t hold up to scrutiny, and that a significant share of planned capacity risked becoming stranded as demand plateaued or declined. Now, those warnings are materializing.

The implications for these terminals are severe. Without Chinese offtake, nearly a third of the volume committed to future U.S. projects has evaporated. Some developers will attempt to resell this capacity, but few buyers have China’s appetite, credit profile, or willingness to sign 20-year deals. With Europe capping long-term gas infrastructure growth and preparing for a long-term decline in fossil imports, the second fallback market is shrinking fast. Projects that have yet to reach FID may be shelved entirely. Banks and institutional investors will demand more conservative projections. Risk premiums will rise. Insurance may become harder to obtain. Terminal utilization rates will fall short of modeled expectations, and the entire economics of Gulf Coast LNG will have to be revisited.

There will still be demand for U.S. LNG, but not at the scale the industry was betting on. Flexible cargoes will find a home in smaller markets. Portfolio players like Shell and Total will optimize flows. But the dream of becoming the world’s LNG pump jack, delivering cheap gas to a hungry world well into the 2040s, is now dissolving as the industry awakes to the dawning new reality. The future isn’t infinite growth. It’s managed decline, smart optimization, and fewer new megaprojects.

Each large U.S. LNG export terminal consumes between 3 and 8 terawatt-hours (TWh) of energy per year, mostly in the form of natural gas used to power compression and liquefaction. That’s roughly equivalent to the annual electricity consumption of a mid-sized U.S. city. In greenhouse gas terms, a fully operational LNG terminal can emit over 2 million tonnes of CO₂ annually, not including downstream emissions from combustion or upstream methane leakage.

Ironically, Trump’s trade war — by freezing China-bound shipments and halting new terminal progress — may have delivered an unexpected climate silver lining: a substantial brake on future emissions from fossil gas infrastructure that would otherwise lock in decades of high-carbon export activity. In trying to punish a geopolitical rival, he has accidentally slowed the expansion of one of America’s most emissions-intensive energy sectors.

The final irony is political. U.S. oil and gas executives spent heavily during the 2024 election cycle, once again backing Trump in the hopes of favorable policies, looser regulations, and accelerated fossil fuel exports. Billions were spent on lobbying, campaign donations, and friendly media to amplify the message that fossil fuels meant freedom and prosperity.

And what did they get in return? A trade war that shuttered their second-largest LNG market, destabilized long-term supply relationships, and sent shockwaves through global energy finance. The approval ban for new terminals may have been lifted, but that doesn’t mean any will be built. Just like in 2019, the industry helped buy the presidency, and once again, got burned by the very man they put in office.