US-Europe LNG trade unshaken by war, sanctions - until now Analysis by National Interest

As transatlantic trade tensions escalate, the European Commission has recently imposed retaliatory tariffs on US imports in response to American duties on €26 billion of European steel and aluminum. Despite this strain, Europe remains deeply reliant on US liquefied natural gas (LNG), especially since the outbreak of the energy crisis in 2022, with over 80 per cent of American LNG exports flowing to the continent in early 2024. The Trump administration is pushing for greater European investment in US LNG infrastructure as part of its “energy dominance” strategy, a move supported by major energy firms but driven by both trade concerns and energy security needs.

With limited alternatives, European governments and the EU must carefully navigate this dependence, balancing relations with the US, business interests, and long-term goals for reindustrialization and energy transition. While recent actions show a mix of strategy and short-term thinking, an article by the National Interest calls for European leaders to reassess their approach to secure the best possible agreement.

For Europe, securing stable LNG supplies while maintaining economic and political flexibility is critical. The continent's LNG demand is expected to decline over time, leading to reluctance from European companies to sign long-term contracts with US suppliers. While strategic gas reserves and reliance on the spot market provide flexibility, they also expose Europe to price volatility.

Continued Russian LNG imports have kept prices lower, but pressure from the US and internal EU divisions could lead to an earlier phaseout. Meanwhile, the Trump administration may tighten export policies if domestic gas prices rise, posing additional risks to European energy security.

The rapid growth of transatlantic LNG trade is a recent phenomenon, driven by the US fracking boom and Europe's need to replace Russian pipeline gas after the Ukraine war. Though Europe also imports from Norway, Qatar, and Algeria, these sources are insufficient.

The EU’s Affordable Energy Action Plan, announced in February, includes investments in US LNG terminals, demand aggregation strategies, and adjustments to gas reserve targets. However, this plan primarily aims to appease the Trump administration rather than meaningfully reduce Europe's trade deficit with the US Additionally, public investments in LNG infrastructure may be risky, given declining demand and Europe’s long-term emissions goals.

A better strategy for Europe would be to emphasize private sector investment in US LNG. European companies like Shell, BP, and TotalEnergies already play a major role in the American energy sector and can serve as intermediaries in negotiations. Rather than committing public funds, European leaders should focus on positioning existing market trends—such as rising US LNG exports and Europe’s need for short-term purchases—as a win for both sides.

The timing is favorable. US LNG exports are set to surge in 2026, creating a global supply glut that could lower prices. The EU must secure additional LNG this year to replenish reserves, especially after the expiration of a key Russian-Ukraine transit contract in January.

If European leaders focus on securing cheaper energy rather than investing in questionable projects, they can leverage these developments to boost economic competitiveness while reducing long-term exposure to LNG market fluctuations. Despite political tensions, Europe has an opportunity to turn the Trump administration’s LNG expansion into a strategic advantage.

By Nazrin Sadigova