Trump vows tariffs on EU unless it increases US oil and gas imports

President-elect Donald Trump said Dec. 20 that he will impose tariffs on the EU if they do not buy more US oil and gas, the latest in a growing list of tariff threats that could impact global energy trade.

"I told the European Union that they must make up their tremendous deficit with the United States by the large-scale purchase of our oil and gas," Trump said in a post on Truth Social. "Otherwise, it is TARIFFS all the way!!!"

The US already exports crude regularly into Europe, primarily light sweet grades, such as WTI Midland.

So far in December, Europe has imported 9.4 million b/d of crude. Of that, 4.4 million b/d was light sweet crude, of which the US supplied 1.8 million b/d.

US crude exports are currently below export capacity because of lower demand from Asia. US crude exports to Asia have averaged 800,000 b/d so far in December, down from a recent peak of 1.8 million b/d in March, according to data from S&P Global Commodities at Sea(opens in a new tab).

US LNG exports

The US, the world's top exporter of LNG and largest source for destination-flexible spot cargoes, is a critical LNG supplier to Europe. The loss of most Russian pipeline gas from late 2021 prompted the region to turn to LNG to offset the lost volumes.

European imports of US LNG more than doubled from 2021 to 2023, from around 22 million mt to nearly 58 million mt, accounting for about 68% of US LNG volumes delivered last year, S&P Global Commodity Insights data showed.

Most LNG exported from the US has continued to flow to Europe in 2024, even though its share of American volumes has declined as shifts in global demand and increased arbitrage opportunities drew US supply elsewhere.

Europe, plus Turkey, so far in 2024 has received about 45 million mt, or about 53% of US volumes, the data showed.

Europe's reliance on US LNG supply is expected to increase over the coming year as the region offsets the anticipated loss of Russian pipeline volumes transiting through Ukraine from the start of 2025, Commodity Insights analysts said in a Dec. 18 report.

Europe has the greatest exposure of any region to US LNG cargoes ahead of proposed tariffs, but the ultimate impact of US tariffs on US LNG exports remains "highly uncertain," analysts said.

After Trump's election in November, European Commission President Ursula von der Leyen suggested US LNG could help replace the trade bloc's imports of Russian LNG.

"We still get a lot of LNG via Russia, from Russia," von der Leyen said. "And why not replace it [with] American LNG, which is cheaper for us and brings down our energy prices."

A leading US LNG trade group emphasized the importance of the energy relationship between the US and EU.

"The US and EU have a great opportunity to enhance energy security and balance trade deficits," Charlie Riedl, executive director at the Center for LNG, said in a Dec. 20 statement.

Broader tariff threats

The EU tariff threat comes after Trump on Nov. 25 promised to impose 25% tariffs on all products imported from Canada and Mexico until they cracked down on drug flows and illegal immigration into the US. Trump also vowed an additional 10% tariff on goods from China, calling for tougher policies on fentanyl.

Trump is very focused on closing deficits with the EU, Canada, Mexico and China, said Rachel Ziemba, a senior adviser with political risk consultancy Horizon Engage.

But it is not realistic to close the EU trade gap with oil and gas given the dollar volumes, especially since Europe is already buying a good deal of oil and gas from the US, Ziemba said.

Most of the LNG the US sells to Europe is redirected fuel from Asia, which is the largest contracted buyer of US LNG and will be for some time, Ziemba said.

"Effectively, for 2025, US fuel export potential is locked in, any additional fuel to Europe would mean less fuel sold to other countries or more need for the US to import oil/liquids," Ziemba said. "Thus, even if the US trade with Europe increased that might widen the trade deficit with China, for example," she said.

The decision to pump more gas or oil in the US would require price increases and lower costs, but Trump's tariffs would likely boost production costs and lower global demand, offsetting the reduction in costs from environmental regulations, Ziemba said.