President-elect Donald Trump in a bold move that has reignited fears of a trade war has issued a stark warning to the European Union: buy more American oil and gas or face massive tariffs on exports to the United States.
This announcement marks Trump's first public statement on trade since his election in November 2024, and it signifies his commitment to a protectionist agenda that has been a hallmark of his political career.
Trump's message was delivered via a post on his social media platform, Truth Social, where he stated, "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. Otherwise, it is TARIFFS all the way!!!"
This ultimatum comes at a time when the U.S. is the world's largest producer of oil and has become the leading supplier of liquefied natural gas (LNG) to Europe, especially after Russian pipeline gas supplies dwindled following the Ukraine invasion in early 2022.
The potential for increased tariffs has raised concerns about a looming trade conflict between the U.S. and the EU. The European Commission President, Ursula von der Leyen, had previously indicated that American LNG could be a viable alternative to Russian imports, stating, "We still get a whole lot of LNG via Russia, from Russia. And why not replace it with American LNG, which is cheaper, and brings down our energy prices."
However, a recent U.S. government study commissioned by the Biden administration found that increasing U.S. LNG exports could lead to a domestic gas price hike of up to 30%, posing economic challenges at home. The study also highlighted the environmental impact of expanding LNG capacity due to high carbon emissions, complicating Trump's pre-election promise to boost LNG exports.
Despite these challenges, there is strong demand for U.S. gas imports from EU economies. In the first half of the year, the U.S. accounted for approximately 48% of the EU's LNG imports, with only 16% coming from Russia. Additionally, America provided 15% of the EU's oil imports in the three months leading up to September, according to Eurostat data.
David Oxley, chief climate and commodities economist at Capital Economics, noted that Trump's demands align with the EU's energy import strategy. He commented, "President-elect Trump's social media outburst warning the EU to buy more US oil and gas won’t cause sleepless nights in Brussels. After all, whereas EU officials might have balked had they been implored to buy armfuls of Trump’s fragrances or watches, it’s firmly in the bloc’s interest to purchase US LNG as part of the continued shift away from Russian gas molecules."
Trump's approach to trade has been characterized by the use of tariffs as both a negotiating tool and a means to encourage reshoring of American manufacturing. His broader trade strategy reflects a mercantilist worldview, emphasizing protectionism and aggressive tariff use. This stance poses economic, strategic, and institutional risks for the U.S. and its trading partners.
Comments