America won’t be able to bully the world into buying more gas

For countries worried that their trade surpluses with America put them in the firing line for tariffs, Donald Trump has a solution: buy American fuel. This month Mr Trump declared that his country’s deficit with the European Union would “disappear easily and quickly” if the bloc did only that. He and his cabinet have pressed other allies, including India and the Philippines, to increase their purchases of American liquefied natural gas (LNG). Scott Bessent, Mr Trump’s treasury secretary, has sought to persuade Japan, South Korea and Taiwan to invest in a vast LNG project in Alaska and commit themselves to purchasing a “substantial portion” of its output.

At first blush, the plan seems plausible. After a decade of rapid expansion, America is the world’s largest producer and exporter of LNG. Mr Trump has sought to encourage further growth in the industry through various deregulatory measures, including the axing of a Biden-era fee on emissions of methane, a potent greenhouse gas, from oil-and-gas sites. Yet the president’s own economic and foreign policies are likely to get in the way of his energy ambitions.

American gas companies certainly spy an opportunity in the trade war. Expanding lng exports is one of the most effective ways America can narrow its deficits, argues Mike Sabel, chief executive of Venture Global, an American LNG company. After a disappointing initial public offering in January, his firm’s fortunes look to be improving; on April 15th a subsidiary raised $2.5bn in the first high-yield bond issuance in America since the mayhem caused by Mr Trump’s tariff pronouncements on April 2nd.

America’s allies, too, are sending encouraging signals. A plan from the European Commission to phase out Russian gas is due to be published in early May; a number of European leaders support replacing it with imports from America. India is considering ending duties on American LNG. Ishiba Shigeru, Japan’s prime minister, has intimated that his country may be willing to invest in the Alaskan mega-project.

Yet lifting LNG exports will not be so easy. For a start, the country lacks sufficient infrastructure to quickly ramp up shipments. “We have the gas, we just don’t have the pipelines to get it places,” explains Toby Rice, chief executive of EQT, another big American gas company. Export terminals are already running close to their maximum capacity.

To make matters worse, Mr Trump’s tariffs will hobble both American firms’ ability to supply lng and other countries’ demand for it. At home, the trade war has sent the cost of steel and other inputs for new American LNG projects soaring. “We don’t see a massive wave of gas coming on,” says Kaushal Ramesh of Rystad Energy, a consultancy. Much of the expansion in LNG capacity that is confirmed is already promised to overseas buyers on long-term contracts. Although there are a number of other proposed LNG projects in America, developers need long-term commitments from buyers to persuade their financiers to hand over funding.

Securing those commitments will be tricky. Demand is expected to slow as many economies are struck by Mr Trump’s trade war. The International Energy Agency (IEA), an official forecaster, predicts that growth in demand for gas in Asia will slump to 2% this year, down from 5.5% in 2024. And American LNG is now unwelcome in China, which last month halted all imports of the fuel from its trade-war adversary. Chinese buyers had been expected to significantly increase purchases from America in the next few years.

The outlook seems somewhat rosier in Europe, which has grappled with a shortfall in gas since Russia cut back exports after the invasion of Ukraine. The continent’s LNG imports will rise by a quarter this year, according to the IEA.

Yet European buyers have been reluctant to commit themselves to long-term contracts for American LNG. Some worry that climate regulations could one day ban the use of gas. Others expect a glut in global gas supply to emerge over the next few years, which would cause prices to collapse.

Then there is the possibility that large amounts of Russian gas will resume flowing into Europe after a peace deal with Ukraine is signed—another of Mr Trump’s ambitions. That would leave little room for buying more LNG from America. Officials in Brussels are adamant they will not allow this, but some German industrialists are already pleading for a return to cheap Russian gas.

In any case, even if Europe did dramatically increase its imports of American LNG, it would not do much to resolve the trade imbalance with America. Wood Mackenzie, a consultancy, calculates that if the EU sourced all of its LNG, diesel and light crude from America it would reduce its trade surplus in goods by only about a half. The cold reality is that Mr Trump’s dreams for American gas are little more than hot air. ■