China Fires Back with Tariffs on LNG, Wheat, Whine: US LNG Exporters Dive

China has prepared a list of retaliations if Trump escalates the trade war with China.

Last week Trump threatened to escalate the trade war with China. Today China responded with threats of its own starting with 25% Tariffs on US LNG.

China is proposing a 25 percent tariff on imports of U.S. liquefied natural gas as retaliation for the Trump administration’s latest threat to impose levies on the Asian giant, a major blow to an emerging American business.

Billions of U.S. dollars may hang in the balance. Cheniere, Tellurian Inc. and other LNG developers have been courting utilities and state-backed companies in the Asian country to justify construction of more terminals to ship the super-chilled form of natural gas. The shares of America’s largest gas exporter, Cheniere Energy Inc., fell on the report.

China accounted for 13 percent of the exports from Cheniere’s Sabine Pass terminal in Louisiana as of mid-June, based on ship-tracking data compiled by Bloomberg. The Houston-based company dropped as much as 7.7 percent after the report, the biggest one-day percentage decline since 2016, while Tellurian slid as much as 6.7 percent.

Assuming the tariffs “go into effect, this is a pretty dramatic move by China,” David Lang, global head of LNG at law firm Baker & McKenzie LLP, said by phone. “This has a real impact on prospective deals,” and could affect the next wave of U.S. LNG export projects, he said.

Kudlow Unimpressed

President Donald Trump will keep pressing China for trade concessions, a top White House economic adviser said, as the Asian nation continued the tariff escalation by announcing further retaliatory actions against U.S. goods.

“We’ve said many times: no tariffs, no tariff barriers, no subsidies. We want to see trade reforms. China is not delivering, OK?,” National Economic Council Director Larry Kudlow said in a Bloomberg Television interview on Friday. “Their economy’s weak, their currency is weak, people are leaving the country. Don’t underestimate President Trump’s determination to follow through.”

China also signaled on Friday it has no intention of retreating from a trade war. The government announced it has prepared a list of $60 billion worth of U.S. goods to hit with duties should the U.S. follow through on a plan to impose duties on an additional $200 billion of Chinese goods, as early as next month. The Chinese duties ranging from 5 percent to 25 percent will be levied on 5,207 kinds of American imports, the Ministry of Finance said in a statement on its website.

Beijing’s plans for tariffs on $60 billion of U.S. goods includes an additional 5 percent in duty on about 600 kinds of U.S. products including planes and computers; another 10 percent on almost 1,000 products including wigs and textiles; an extra 20 percent on more than 1,000 items including some chemicals, cookers and paper; and an additional 25 percent on over 2,400 products such as meat, wheat, wine and LNG.

More Winning Coming Up

More winning is in the way. Trump will likely follow through on a proposed 25% tax on goods from China, and China will retaliate. This is called "winning"

It's safe to add Cheniere, Tellurian Inc. and other LNG developers to the Growing List of Companies and Organizations Complaining About Tariffs

Fight Fire With Fire

Some of my readers praise Trump for these actions on the basis he needs to "fight fire with fire". Such thoughts are complete silliness.

As I have stated dozens of times, if China is supplying the US with cheap steal, cheap solar panels, cheap whatever, we should be grateful.

Once again, this is indisputable: Standards of living rise when more goods are available at a cheaper price.

Please China, make us pay more! How stupid is that? There is not a damn thing to fight!

There are concerns about theft of IP, but nothing forces companies to do business with China if they believe the threat is real. Anyway, tariffs are not the proper way to deal with such issues.

In regards to the EU, it will take at least a decade to work out another treaty because all 27 nations will have to sign on and ratify the package. It will not happen under Trump.

Finally, and as I have also stated before, trade imbalances started when Nixon closed the gold window. It is absurd to expect tariffs will solve that problem.

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This is not about beating up on Trump, this is about beating up on blatantly foolish ideas.

Mike "Mish" Shedlock

Comments
No. 1-16
Kinuachdrach
Kinuachdrach

A Chinese tariff on US Whine? Why should the Democrats have to pay for everything? Is that fair?

The US has been ill-served by its Political Class for too many years. Mish's theory about the (short term) benefit (to a subset of the population) of lower import prices depends on those in the US who inevitably lose their jobs finding new better-paying jobs, presumably in higher technology items which the Chinese cannot yet match. Yet, for example, Billy Clinton gave the Chinese access to very expensively developed US missile guidance technology -- and now the Chinese compete with the US on satellite launches.

Mish's theory on the benefits of low-priced imports is like the now-disproved environmentalists' Anthropogenic Global Warming theory -- there is a grain of truth in the over-simplified theory, but the real world is so much more complex with many additional factors the model ignores; consequently, the theory is useless.

Just to be clear -- bilateral free trade is a worthy goal, including the very important elimination of non-tariff barriers as well as zero tariffs; unilateral free trade with a mercantilist nation like China is slow economic suicide.

Casual_Observer
Casual_Observer

Trump is trying to lower trade barriers but he doesn't realize the US cant compete on price alone. In project management you have time, cost and quality. Trump should push US manufacturers to compete on quality and not cost or time. People will pay more for higher quality.

dltravers
dltravers

You premise does not ring true. If the EU can instantly raise tariffs on products as it did then it can instantly lower them as well without going to the whole block.

Ross Perot was right. NAFTA started the giant sucking sound of high paying jobs leaving the country. We get cheap products in return but it is not much of a payback.

With the lose of those higher paying jobs came the loss of of their health benefits as well. It started the death spiral of rising health insurance costs.

In addition, we tend to respect a persons labor much better than China. My daughter managed 5 Chinese factories for a clothing importer. Her boss wanted even cheaper costs. On his trip to China they showed him the cheapest factory. It was full of little children working dangerous mills. He cried as he left.

China needs to respect people and their intellectual property. Given time, they may. Given time, they may not.

Liki_Weaks
Liki_Weaks

You can't really have it both ways. Sometimes having 'cheap sh-t' from China isn't really so cheap in the long run. Sure, it suits those who have set up their businesses and lifestyles on us buying cheap sh-t from China, but industry, jobs, military security depend on a nation actually being able to source those things from within.

On the same page here, there's an article about "Free Stuff" (Medicare for all) which argues that sometimes what appears to be free, really isn't.

Tariffs and trade have to be viewed with a longer range time frame of what is really best instead of what will benefit me right now. It's a shortcoming of our N. American thinking in politics and managing businesses for this quarter's results, etc.

I, for one, am grateful that someone is taking a longer view

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