Liquefied natural gas (LNG) and tungsten—critical commodities for the defense and energy industries—have become key battlegrounds in the latest round of US-China trade tensions.
After President Donald Trump imposed a blanket 10% tariff on all Chinese imports, Beijing responded with targeted measures, including export controls on tungsten and other niche metals such as molybdenum and tellurium. China also levied a 15% import tax on LNG and coal, along with a 10% duty on oil and agricultural equipment.
LNG and Coal: Trade Flows Disrupted
As the world’s largest LNG exporter, the US plays a crucial role in global energy markets, while China is its biggest importer. The new tariffs are expected to reshape trade routes, with Chinese buyers likely to seek alternatives from suppliers such as Qatar and Australia rather than entering long-term contracts with US projects.
China imported 6% of its LNG from the US last year, a figure that is now expected to decline as buyers redirect cargoes, particularly to Europe, where Russian supply disruptions have pushed prices higher. Analysts suggest that Chinese firms may resell their contracted US LNG shipments elsewhere to avoid tariffs.
Meanwhile, US thermal and coking coal exports to China accounted for just 3% of China’s total imports in 2023. Given its ample domestic coal reserves and alternative suppliers, Beijing is expected to easily fill the gap.
Tungsten and Strategic Metals: Beijing’s Targeted Retaliation
China’s decision to impose export controls on tungsten and four other critical metals underscores its strategic approach to the trade war. These materials are essential for the electronics, aerospace, defense, and energy sectors.
With China responsible for around 80% of global tungsten production, the move could disrupt supply chains for armor-piercing missiles, semiconductors, and solar panels. Unlike previous rounds of restrictions focused primarily on semiconductors and military applications, this wave of export controls also impacts consumer goods and renewable energy industries.
While China has yet to impose tariffs on US metal imports, copper remains a key trade link. The US exports around 40% of its copper scrap and 16% of its copper concentrate to China, making it a potential target for future retaliatory measures.
Oil: Minimal Impact, But Strategic Implications
China imported roughly 910,000 tons of US crude in December, representing only 2% of its total oil imports. While this volume is relatively small, Washington’s restrictions on Russian energy and potential curbs on Iranian oil could make US crude more strategically important.
Chinese refineries, including Sinopec, may now need to turn to alternative suppliers in the Middle East to secure lighter, sweeter crude varieties.
Agriculture: A Lever for Future Negotiations
While Beijing imposed tariffs on US-made agricultural equipment, it stopped short of taxing American crops. This leaves room for China to either increase or reduce purchases depending on the evolution of trade negotiations.
China has already reduced its dependence on US agricultural products since Trump’s first term, diversifying its suppliers. However, a potential $10 billion in US agricultural exports remains at risk. In 2018, US soybean exports to China plummeted from $14 billion to just $3 billion due to earlier trade tensions.
Outlook: Strategic Moves on Both Sides
China’s response to Trump’s tariffs has been measured, focusing on key sectors where it has leverage while avoiding broader economic disruption. As trade tensions escalate, markets will watch closely for further retaliatory steps and potential shifts in global supply chains.
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