Early on the 20th, U.S. President-elect Trump once again wielded the tariff “big stick” against the EU. He posted a threat, stating that if EU member states did not purchase more U.S. oil and gas to reduce the trade deficit with the U.S., tariffs would be imposed on the EU. This marked Trump’s first trade offensive against Brussels since winning the presidential election. His remarks immediately sparked heated discussion in European media.
The EU’s Response and Defense
“I told the EU that they must offset the massive trade deficit with the U.S. by purchasing large amounts of our oil and gas. Otherwise, tariffs are coming,” Trump wrote on social media on the 20th, according to Reuters. He suggested that the EU should increase its imports of U.S. oil and gas or face tariffs on EU exports such as cars and machinery. Germany and Italy, whose car exports currently face a 2.5% U.S. tariff, could see tariffs rise significantly if Trump’s threats are carried out.
Regarding Trump’s “ultimatum” in the trade field, CNBC reported that the EU Commission’s spokesperson for trade, Gilles, quickly responded. At a press conference that day, Gilles pointed out that the U.S. also enjoys a substantial trade surplus in services with the EU, and the EU remains open to negotiations with the U.S. The latest data shows that last year, the U.S. had a goods trade deficit of €155.8 billion ($161.9 billion) with the EU. However, according to Eurostat, the U.S. achieved a €104 billion surplus in services trade with the EU.
Gilles remarked, “The EU and U.S. economies are deeply integrated, with overall trade and investment being balanced. We are ready to discuss with President-elect Trump how to further strengthen this robust relationship, including our mutual interests in the energy sector.”
He added, “The EU is committed to gradually reducing energy imports from Russia and diversifying its supply sources.”
In response to Trump’s threats, a spokesperson for Germany’s Ministry of Economic Affairs stated that Germany has a free natural gas market, and the signing of gas contracts is determined by companies, not the government.
Decreased Demand for U.S. Natural Gas
In 2023, the U.S. surpassed Australia and Qatar to become the world’s largest exporter of liquefied natural gas (LNG) for the first time in history. This achievement was directly linked to a surge in imports from the EU. To compensate for the significant energy supply gap caused by sanctions on Russia, the EU had to increase its reliance on U.S. energy. According to EU statistics, in the first quarter of 2024, 47% of the EU’s LNG imports and 17% of its oil imports came from the U.S. German Chancellor Olaf Scholz pointed out that 90% of Germany’s LNG imports come from the U.S.
Reuters reported that U.S. oil and gas exports to the EU had been steadily rising in recent years, with LNG exports to Europe hitting a record high in 2023. However, the situation changed in 2024, with shipments from January to August down 22% compared to the same period in 2023. Data from the U.S. Energy Information Administration (EIA) shows that the average export price of LNG in the first half of 2024 was over 25% lower than in the first half of 2023, resulting in a significant blow to U.S. export revenues.
One key driver behind this slowdown is the sharp rise in renewable energy generation in Europe. According to Ember, the share of solar and wind power in Europe’s electricity generation jumped from about 16.4% in 2022 to 20.5% in 2024. Meanwhile, the share of gas-fired power generation dropped from around 26% in 2022 to 22% this year. Europe’s reduced reliance on gas is bad news for U.S. LNG exporters. Reuters noted that this trend could cause the U.S. to lose its status as the world’s largest LNG exporter.
Challenges for the EU
Since Trump’s election victory in November, he has repeatedly threatened U.S. trade partners with higher tariffs. U.S. Treasury Secretary Janet Yellen previously warned that Trump’s plan to impose high tariffs on a wide range of imports would increase costs for American households and businesses, undermine efforts to curb inflation, and hinder economic growth.
William Reinsch, a trade expert at the U.S. Center for Strategic and International Studies (CSIS), told Reuters that the EU could resolve Trump’s tariff threats through negotiations. He commented, “This could be a win-win outcome.” However, in reality, most European refineries and gas companies are privately owned. Unless authorities impose sanctions or tariffs, governments cannot dictate procurement sources. Companies typically base purchasing decisions on price and efficiency.
Additionally, U.S. oil and gas production and export volumes have already reached their peak. While Trump has promised to further increase U.S. oil and gas production, this requires significant investment, particularly in LNG export terminals. Reinsch stated that although Europe currently has a demand for U.S. oil and gas, the long-term demand is uncertain due to the transition to renewable energy. If U.S. companies believe current demand is only temporary, they may be reluctant to invest.
According to U.S. media, the Biden administration suspended approvals for LNG export projects in January 2024 and pushed for studies on the projects’ impacts on climate change, the economy, and national security. Trump, however, has vowed to end this freeze on “his first day back in the White House,” claiming it has stifled investment and job creation in the domestic gas industry. Industry experts have noted that this process could take “several months to a few quarters” to implement.
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