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China's response has been swift and predictable: When the Trump Administration on Monday threatened to expand tariffs to include some $200 billion in Chinese goods, Asia's economic powerhouse promised swift retaliation should that occur.
The back-and-forth picked up on Friday, when the U.S. announced tariffs on $50 billion of Chinese goods. China countered with measures that will affect a wide range of American imports, including many energy and petrochemical products.
But China's list excluded one notable commodity: liquefied natural gas.
Analysts expect it will remain that way, even as the trade war escalates. China, they say, can't afford to jeopardize shipments of U.S. LNG as it works to reduce dangerous smog levels in its major cities by curbing emissions and reducing its reliance on coal. The country, as a result, is relying more heavily on imports of cleaner-burning natural gas, which is which is scarcer than coal throughout Asia.
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Fears of a trade war are mounting after China threatened "a necessary response" to planned US tariffs on steel and aluminium imports. President Trump is expected to approve the duties at a ceremony on Thursday, though officials have said that could slide into Friday due to legal reasons. Faced with opposition from congressional Republicans, the White House has indicated some countries, notably Canada and Mexico, could be offered exemptions from the planned tariffs. White House Press Secretary Sarah Huckabee Sanders said: "There are potential carve outs for Mexico and Canada based on national security and possibly other countries as well based on that process. (Questions off camera)..."Again that would be a case by case and country by country basis, but it would be determined whether or not there is a national security exemption." On Monday, Trump said Canada and Mexico would only be excluded after the successful renegotiation of the North American Free Trade Agreement (NAFTA). The US tariffs could see a 25 percent hike on steel, and 10 percent on aluminium to counter cheap imports. Earlier, Beijing said it would not take such a move lying down. Chinese Foreign Minister Wang Yi said: "History has taught us that trade wars are never the solution. In a globalised world, choosing a trade war is the wrong prescription. As a result, it will only hurt both sides, and China will surely make a justified and necessary response." Europe has also warned president Trump to expect retaliatory strikes against iconic American products such as Levi's jeans, Harley-Davidson bikes and bourbon whiskey, among others.
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Research firm Wood Mackenzie noted that U.S. LNG accounted for 4 percent of China's demand last year as it overtook South Korea as the world's second-largest LNG importer. The firm expects that figure to grow as the domestic exports ramp up and China accelerates its transition to natural gas.
"LNG is clearly seen as an essential good by the Chinese government," said Nicholas Browne, the firm's head of Asia-Pacific gas and LNG. "In the event of an escalation, LNG is likely to remain outside the bounds of any additional tariffs."
That's good news for companies including Houston's Cheniere Energy, which earlier this year struck deals with state-owned China National Petroleum Corp. to ship 1.2 million tons of LNG a year under contracts that extend through 2043. The company was the first to export U.S. LNG in 2016.
Other LNG companies are eyeing China. NextDecade LNG, based in The Woodlands, announced on Monday it has hired a senior vice president for LNG marketing for China and Southeast Asia. The company, which is now building an export terminal in Brownsville, earlier this year opened offices in Singapore and Beijing.