Can the EU Avoid Trump's Tariffs by Importing More U.S. Oil and Gas?

(Getty Images)

Increased EU purchases of U.S. oil and natural gas may ease trade tensions and facilitate talks to prevent or reduce tariffs under a second Trump administration, but LNG market dynamics and the European Union's internal dynamics make it unlikely that these adjustments will fully resolve trans-Atlantic trade disputes. In a Dec. 20 post on his Truth Social platform, U.S. President-elect Donald Trump threatened to impose tariffs on imports from the European Union unless the bloc committed to significantly increasing imports of U.S. oil and gas to reduce the United States' ''tremendous [trade] deficit'' with the European Union. Trump's warning comes after European Commission President Ursula von der Leyen said in November that the European Union could increase purchases of U.S. liquified natural gas (LNG) as a way to both reduce its large trade surpluses with the United States, and help replace the bloc's remaining imports of Russian LNG as part of Brussels' goal to fully phase out Russian energy imports by 2027. This idea was echoed by European Central Bank president Christine Lagarde, who in November urged EU leaders to buy more U.S. products to avoid U.S. tariffs at a time when the bloc is already facing intense economic challenges. EU officials are also reportedly working on retaliatory measures to counter any U.S. trade restrictions if negotiations fail.

In his post, Trump said he had ''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!!!''
Trump has threatened to impose a 60% tariff on all imports from China, along with a 10-20% blanket tariff on all goods entering the United States, including from U.S. trade partners like the European Union. During his first term, Trump also threatened to place tariffs on imports of EU vehicles, as well as any imports from EU countries that had implemented a digital services tax.
The European Union has set out a non-binding, ambitious target to achieve a complete decoupling from all imports of Russian energy sources by 2027 under its RePowerEU plan.

The expansion of U.S. LNG export capacity, coupled with rising EU demand driven in part by the anticipated halt of Russian pipeline flows via Ukraine, will create opportunities for new supply agreements. The United States is already the European Union's leading supplier of both LNG and oil, having played a critical role in stabilizing Europe's energy supply during the 2022-2023 crisis when prices spiked following Russia's invasion of Ukraine. According to Eurostat, the United States supplied 48% of the bloc's LNG imports in the first half of 2024, while Russia supplied 16%. With new export facilities set to begin operations in the coming years, U.S. LNG export capacity is projected to increase from today's 13.8 billion cubic feet per day (Bcf/d) to 17.8 Bcf/d in 2025, before reaching 24.2 Bcf/d by 2028, according to the U.S. Energy Information Administration (EIA). Meanwhile, Russian pipeline flows via Ukraine will almost certainly grind to a halt on Dec. 31, which is when Ukraine's five-year transit agreement with Gazprom to transport natural gas to buyers in the European Union expires. Russian flows via TurkStream — one of the two remaining pipeline connections between Russia and the European Union, along with BlueStream — may increase slightly. However, the European Union will need to import more LNG to balance the shortfall, with the United States being a likely supplier.

On the oil side, the EIA's December Short-Term Energy Outlook forecasts U.S. crude output to grow by just 280,000 barrels per day in 2025, a much slower pace than previously anticipated. This limits the capacity for oil exports to play a significant role in reducing the United States' trade deficit with the European Union.

However, the European Union's limited ability to influence member states' LNG procurement strategies, combined with complex market dynamics, suggests that greater EU purchases of U.S. oil and gas are unlikely to fully resolve trade tensions between Brussels and the Trump administration, which will keep U.S. tariffs and EU retaliation on the table. Over the next few years, the United States will have enough export capacity to sign new LNG supply agreements with buyers in the European Union. However, Brussels has limited influence over EU member states and especially private companies' energy procurement strategies. The European Commission could significantly tighten restrictions on imports of Russian LNG, which still account for a significant share of the bloc's total natural gas intake. But this would prove difficult due to the ongoing lack of consensus among member states on the matter, as European governments remain under pressure to secure their energy supplies and keep prices under control. In inking new contracts with U.S. LNG sellers, European buyers will also face stiff competition from Asian buyers, particularly Chinese buyers, where LNG demand is expected to rise alongside the expansion of regasification capacity next year. Additionally, European buyers may simply opt for contracts with alternative suppliers rather than prioritizing U.S. LNG, as significant new global LNG supply is set to enter the market from the Middle East starting in 2026, notably from Qatar and the United Arab Emirates. These dynamics will make it challenging for Brussels to secure sufficient commitments from European buyers to meet the volumes of additional LNG purchases likely to be sought by the incoming Trump administration, thereby leaving the door open to U.S. tariffs and other trade tensions in the coming years. Still, promised energy trade adjustments, coupled with other EU commitments — such as tightening technology export restrictions vis-a-vis China or increasing defense spending (including via higher procurement of U.S.-made equipment) — may serve as valuable bargaining chips in negotiations to ease bilateral trade tensions.

Promises of increased LNG purchases and other trade adjustments are unlikely to fully resolve bilateral trade tensions. The Trump administration is still likely to at least threaten to impose tariffs on EU goods in 2025, whether as part of a sequenced, sector-specific approach or a unilateral blanket tariff increase without prior negotiations. And in response, the European Union will likely impose retaliatory tariffs on politically sensitive U.S. products or deploy defensive trade tools like the bloc's Anti-Coercion Instrument.
Even if assurances from the European Commission of future increased LNG purchases from the bloc satisfy Trump, there is little guarantee that European companies will effectively follow through on these commitments in the following years due to the lack of enforcement mechanisms in such agreements. This means the trade deficit issue could resurface within two-to-three years, reigniting the threat of U.S. tariffs.