Trump Threatens EU with Tariffs Over Oil and Gas Imports

President-elect Donald Trump has warned the European Union that it must significantly increase purchases of US oil and gas or face tariffs on a wide range of exports, including cars and machinery, reports Reuters.

Trump, who takes office on January 20, 2025, issued the ultimatum in a post on Truth Social, stating, "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!!!"

The EU currently imports a substantial portion of its oil and gas from the US. According to US government data, the bloc already purchases the lion's share of US oil and gas exports. However, Trump asserts that the EU must significantly increase these purchases.

The European Commission responded by stating its willingness to discuss strengthening ties with the US, including in the energy sector. "The EU is committed to phasing out energy imports from Russia and diversifying our sources of supply," a spokesperson said.

The US supplied 47% of the EU's liquefied natural gas (LNG) imports and 17% of its oil imports in the first quarter of 2024, according to Eurostat.

Trump's threat to impose tariffs echoes his previous rhetoric on trade. He has pledged to implement a 10% tariff on global imports and a 60% tariff on Chinese goods, moves that trade experts warn could disrupt global trade flows and lead to retaliatory measures.

The US had a $208.7 billion goods trade deficit with the EU in 2023, according to the US Census Bureau. While the US enjoys a services trade surplus with the EU, Trump has focused primarily on goods trade, expressing frequent complaints about the bloc's car exports to the US.

German and Italian car exports to the US currently face a 2.5% tariff, which could potentially quadruple if Trump carries out his tariff threats.

Trump has also threatened to impose tariffs on Mexico, Canada, and China on his first day in office if they fail to address illegal border crossings and fentanyl trafficking into the US.

William Reinsch, a trade expert at the Center for Strategic and International Studies, noted that the EU might be able to negotiate its way out of Trump's tariffs. "This could be a win-win, telling them to buy something they want and need anyway," Reinsch said.

However, most European oil refiners and gas firms are privately owned, with governments having limited influence over their purchasing decisions. These companies typically base their resource purchases on price and efficiency considerations.

While the US is currently producing and exporting record volumes of oil and gas, further expansion would require significant investment, particularly in LNG export terminals.

Reinsch noted that while there is current demand in Europe for US oil and gas to replace Russian supplies, long-term demand is uncertain given the transition to renewable energy sources. Companies may be hesitant to invest if they perceive the current demand as temporary.

The EU has significantly increased its purchases of US oil and gas since imposing sanctions on Russia following the invasion of Ukraine in 2022. The US has become the world's largest oil producer, with output exceeding 20 million barrels per day. US crude exports to Europe currently stand at around 2 million barrels per day, representing over half of total US exports.

"Europe is taking close to its maximum capacity for U.S. crude, meaning there is little scope for stronger imports next year," said Richard Price, oil markets analyst at Energy Aspects.

The US is also the world's largest gas producer and consumer, with output exceeding 103 billion cubic feet per day. The US government projects that US LNG exports will average 12 billion cubic feet per day in 2024. Europe accounted for 66% of US LNG exports in 2023, with the UK, France, Spain, and Germany being the primary destinations.