A Gaslight Moment for US-China Trade Relations

The proposed reduction or elimination of China’s tariffs on American liquefied natural gas (LNG) marks a significant shift in the fragile trade relationship between the world’s two largest economies. As Chinese President Xi Jinping prepares to visit Washington next week, the US and China are engaged in high-stakes negotiations that could see both sides cut tariffs on $30 billion worth of goods.

The development has far-reaching implications for global energy markets. For years, trade tensions have hindered American LNG producers’ access to one of their largest markets. The 15% tariff imposed by Beijing in February 2025 effectively halted US-China LNG trade, with significant cargoes arriving just before that. Now, as the US enters a major expansion phase, restoring Chinese buyers would give producers another vital destination for their gas.

The invasion of Ukraine disrupted Europe’s access to Russian pipeline gas, drawing US LNG cargoes towards the continent instead. Meanwhile, tensions with Iran have increased competition for LNG in Asia. Against this backdrop, China and the US find themselves locked in a delicate dance – one that could either stabilize or further destabilize global energy markets.

US LNG exports to China were booming before the tariff dispute, reaching a record 131 vessels in 2021. This was after large-scale exports from the Lower 48 states began in 2016, creating what had seemed like an unstoppable trend. However, recent months have seen several US cargoes arrive or head for Chinese ports – even with the tariff still in place. This suggests buyer interest and a potential turning point in this high-stakes negotiation.

The proposed deal is part of broader efforts to stabilize trade ties ahead of a September 24 meeting between Trump and Xi. While not final, these discussions underscore the economic incentives driving both sides towards agreement. China is the world’s largest LNG importer, while the US is its largest exporter – giving them a vested interest in restoring their once-thriving trade relationship.

For American LNG producers, this development couldn’t come at a better time. As new export capacity comes online, producers are seeking new markets to absorb the increased supply. The return of Chinese buyers would address this issue and help underpin demand for projects currently under construction – those now seeking financing and long-term customers.

This proposed agreement speaks to a broader pattern in global trade relations – one marked by an increasing willingness to compromise on contentious issues when faced with the prospect of greater instability. It’s a gaslight moment for US-China trade relations, where both sides are trying to navigate their complexities while avoiding further confrontation.

The return of Chinese buyers would mark a significant turning point in US-China trade relations and underscore the enduring importance of LNG in global energy markets. It would also be a reminder that even amidst great uncertainty, there remains an underlying economic logic driving these complex negotiations.