Transatlantic ties are fraying under the Trump administration, but Europe’s demand for LNG from the United States is still robust.
Since 2022, Europe has become critically reliant on imports of liquefied natural gas (LNG) from the United States to meet its energy needs. It has few alternatives. European governments and the EU need to manage this dependency carefully to balance relations with the Trump administration, business interests, and their ambitions for reindustrialization and the energy transition. Recent moves signal a mix of strategy and short-termism. European leaders should reevaluate their positions to get the most out of a potential agreement.
On March 12, the European Commission imposed retaliatory tariffs on a range of American imports in response to U.S.-imposed tariffs on €26 billion of European steel and aluminum. Trade tensions are escalating as the transatlantic defense partnership reaches a low point. As these ties fray, Europe is drawing closer to the U.S United States in one critical way: the continent is now the primary customer for U.S. LNG, with eighty-two percent of American LNG cargoes heading to Europe in February and eighty-six percent in January. In 2024, Europe accounted for fifty-five percent of total U.S. LNG exports.
And the Trump administration wants more. Both the European Commission and Europe-based energy multinationals have reacted by announcing plans to invest in U.S. LNG infrastructure. But while energy companies have a global business interest in expanding U.S. production and exports, the Commission’s position is a direct response to President Trump’s calls for the EU (as well as Japan and other countries) to buy more U.S. LNG as part of his “energy dominance” agenda.
Given Europe’s reliance on the United States for this critical resource and the otherwise deteriorating transatlantic relationship, what would a good deal on LNG look like for Europe on the other side of trade and tariff negotiations?
European leaders need to take many factors into consideration.
In the short term, Europe will continue to need access to U.S. LNG. But its demand is structurally declining and European companies are reluctant to sign long-term contracts with U.S. suppliers. Even with its strategic gas reserves, relying on flexible contracts and spot markets will expose European industry and consumers to price fluctuations – a major cause of political discontent and business decline during the 2022-2023 energy crisis – just as Europe is trying to recreate friendly business conditions and boost its competitiveness. Continued LNG imports from Russia have helped ensure supply and lower prices, but are now increasingly a liability due to pressure from the US, discord between member states and the evolving conditions of a ceasefire in Ukraine. The United States is also pushing Europe to compromise on environmental standards. And if U.S. domestic gas prices start to rise, the Trump administration could tighten its export policy and engineer another European energy crisis.
History does not provide much guidance. The heavy transatlantic trade in LNG is a very recent phenomenon. The United States didn’t become a major global producer of natural gas until the fracking revolution in the early 2010s and only opened its first LNG export terminal in 2016. Europe’s current dependence began in 2022 after the outbreak of the war in Ukraine and the end of pipeline gas imports from Russia. Though it also sources gas from Norway, Qatar and Algeria, these are insufficient to meet demand. And a potential phaseout of Russian imports – planned for 2027, but possible earlier – sets the United States up as the most available partner, if not the most politically reliable one.
Recent moves by the EU show evidence of strategic thinking but also short-termism.
In addition to hedging on banning Russian LNG this year, the Commission President von der Leyen revealed what amounts to a new European LNG strategy on February 26 within the Affordable Energy Action Plan as part of a flurry of announcements aiming to cut red tape, boost European competitiveness, and promote domestic industry. The plan proposes new EU-level investments in U.S. LNG terminals – like Japan’s investments and promised “joint venture” in an Alaska LNG site – as well as proposals for aggregating demand, optioning purchases and changes to gas reserve filling targets.
The Commission’s plan shows evidence of nervousness about price spikes and low reserves. Europe’s gas reserves are indeed lower than in years past, and refilling them while keeping prices stable will be a major focus this year. The language of the Affordable Energy Action Plan is deliberately vague on targets, balancing the need for flexible but secure goals while attempting to undercut speculation by gas traders which helped drive up prices this winter. This is a smart move.
But the overall plan has a major strategic weakness: it aims to appease President Trump, but investing in U.S. LNG infrastructure won’t have a major impact on his main gripe, which is Europe’s trade deficit in goods with the United States. Second, it is unclear whether such commitments even make sense – private investors will be wary of Europe’s declining demand, and the project goes counter to Europe’s overall emissions goals.
Instead of investing public funds, European leaders should hammer the extent to which European companies like Shell, BP and TotalEnergies invest in the United States LNG industry, leaning on them as intermediaries and ambassadors, and try to extract a deal that positions probable market developments – more LNG purchases, but fewer long-term contracts – as a win for the United States.
The context is favorable. U.S. exports are expected to increase dramatically this year, and the EU needs to buy more LNG than last year to refill its storage facilities, especially after the end of a major Russian-via-Ukraine gas transit contract in January. The International Energy Agency (IEA) and private sector analysts predict that a global LNG supply glut will begin in 2026, propelled in part by new U.S. exports. The market saturation could significantly lower prices for Europe and help firms and consumers restore competitiveness.
European leaders need to resolutely focus on getting back to cheap energy to boost European growth. They should reevaluate the coherence of their proposals on LNG and avoid committing to unviable projects. Instead, they should tie a bow on mutually beneficial market developments this year and turn the narrative back to growing European private sector investment in the U.S. LNG industry, rather than LNG within the trade deficit. The United States may be politically challenging as a partner right now, but Europe has an opportunity to ride the tidal wave of gas exports unleashed by the Trump administration to a world of cheaper energy and, in the long term, to less exposure to LNG markets at all.
Eamon Drumm is a research analyst on the German Marshall Fund’s Risk and Strategy team.
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