The United States has emerged as a leading energy producer over the last decade, producing large quantities of oil and natural gas. Indeed, some would say that the U.S. is producing too much energy, resulting in a glut of natural gas. Now, China is looking to hurt the U.S. energy sector by imposing 10 percent tariffs on its natural gas imports.
Natural gas has become one of America’s most successful export industries, and China is among the biggest energy consumers in the world. American energy companies have been rushing to build dozens of facilities to export liquid natural gas (LNG) to China. The Chinese government even agreed last year to invest as much as $43 billion in Alaska’s LNG industry.
Now, those investments may be at risk, and American energy producers are sure to feel the pinch of tariffs. China’s move came after the Trump administration slapped 10 percent tariffs on an additional $200 billion worth of goods, on top of the $50 billion already targeted.
The current 10 percent tariffs are unlikely to slow Chinese imports or spur growth at home. However, the tariffs will rise to 25 percent come January 1st, which could spur American companies to source goods from elsewhere. China has been trying to strike back, but there’s a problem: the United States doesn’t export nearly as much to China owing to the massive trade deficit. This means the Chinese can’t simply slap reciprocal tariffs on American goods.
As a result, China is likely to experience far more pain. Economists are warning that the tariffs could cost China as much as .6 percent of its GDP growth next year. Chinese Premier Li Keqiang, the second highest-ranking politician in China, has warned that it’s becoming more difficult to keep the economy stable, with the ongoing trade war being among the key threats.
Now, famed Chinese billionaire and founder of Alibaba, Jack Ma is taking things into his own hands. Ma had previously promised to create one million jobs in the United States, but announced today that he’s canceling those plans. However, analysts had doubted that Ma could deliver on his pledge anyways.
Ma had planned to help small American enterprises sell their goods globally via Alibaba. However, economists were skeptical that enough American small businesses would join the online platform to generate one million jobs. Either way, the tariffs and ongoing trade war will make it far more difficult for American companies to tap into Chinese markets.
While the American economy isn’t as vulnerable to tariffs, consumers are sure to feel the pinch at the checkout line. Head to your local Walmart or order goods online through Amazon, and you’ll notice that many of them are made in China. Most likely, the smartphone or computer you’re using to read this article was likewise assembled in China.
The 10 percent tariffs will raise the costs of those goods. 25 percent tariffs would raise costs even further. This will likely tamp down consumption, but the Trump administration hopes that it will spur American manufacturing. The other hope is that China will open up its economy and cut tariffs, which could spur exports from the United States.
Indeed, China has announced that it is looking to reduce tariffs on imports as soon as October, potentially delivering President Trump a big policy win ahead of the midterms.
