The escalating trade war between the US and China is threatening a third, lesser-known commodity class – natural gas liquids (NGLs) – particularly propane and ethane. China is the largest importer of American ethane, accounting for nearly half of the exports, while the second-largest importer after Japan takes most of its propane.
The tariffs imposed by China on NGLs have triggered a sharp decline in prices, with propane and ethane falling 25% and 15%, respectively, since March. This has significant consequences, including plummeting prices, upended supply chains, and financial challenges for US producers, transporters, and exporters of NGLs.
Unless a tariff exemption is offered, China will be forced to shut down its petrochemical plants, pay higher prices for US feedstock supplies, or find new sources. This could lead to significant disruptions in the global supply chain, particularly for goods manufactured from petrochemicals, which are exported back to the US, contributing to double tariffs and larger inflation.
The impact on US energy companies is limited, as they declined comment for this story. However, the American Petroleum Institute weighed in via a statement, saying it will continue to engage with the administration and partners to support American energy dominance.
With no easy solutions to reroute ethane and propane exports, the US cannot simply stop producing NGLs due to its impact on crude oil and natural gas production. The issue is whether Chinese chemical plants are willing to pay higher prices or negotiate a split between themselves and US exporters.
If China mothballs plants, the US could max out its propane storage capacity in months, leading to cheap domestic dumping of propane to US petrochemical plants as prices further collapse. Ethane exports may also be affected due to “ethane rejection,” where volumes can disappear within the US by contributing to domestic natural gas consumption.
The future of US NGLs hangs in the balance as the trade war with China continues, with significant implications for the global supply chain and US energy companies.
Source: https://fortune.com/2025/04/17/crude-oil-gas-china-propane-ethane-exports-tariffs