Energy thaw tests Xi-Trump reset

China’s search for safer gas supplies has pushed energy to the centre of Xi Jinping’s talks with Donald Trump in Beijing, where the war involving Iran has sharpened pressure on both sides to repair a trade channel that collapsed under tariffs.

The discussions come as disruption around the Gulf has unsettled fuel markets, tightened liquefied natural gas flows into Asia and revived the commercial logic of United States energy sales to China. Beijing’s retaliatory duties on United States LNG and crude have pushed cargoes away from Chinese terminals for more than a year, even as China remains one of the world’s largest gas buyers and the United States continues to expand export capacity.

Trump’s visit to Beijing, his first state visit to China since returning to the White House, has brought together trade, security and energy issues at a moment when both economies have incentives to narrow areas of dispute. China wants more flexible fuel options as Middle East supply risk rises. Washington wants outlets for fast-growing LNG production and a broader trade package that can show progress without requiring either side to resolve deeper disagreements over technology, industrial policy and security.

Energy has emerged as one of the more practical areas for negotiation because it offers measurable trade flows and clear commercial benefits. China imposed levies on United States energy after Trump’s tariff measures escalated last year, including duties that made LNG cargoes uneconomic for many buyers. Direct United States LNG shipments to China have largely disappeared since early 2025, with Chinese companies diverting contracted volumes to Europe and other markets or relying more heavily on supplies from Qatar, Australia, Russia and Southeast Asia.

The war involving Iran has altered that calculation. Shipping concerns, Gulf supply disruptions and higher spot prices have exposed the vulnerability of Asia’s dependence on Middle East LNG. Qatar’s role as a major supplier to China has made the risk particularly acute, while the Strait of Hormuz remains central to both oil and gas flows. Any further interruption would deepen competition among Asian and European buyers, raising costs for power producers, manufacturers and households.

China has attempted to manage the shock by increasing coal use, drawing on pipeline gas, and seeking alternative cargoes. But these options carry costs. Coal helps preserve power security but complicates Beijing’s climate targets and worsens local pollution. Pipeline supplies are constrained by infrastructure and geopolitics. Spot LNG purchases at elevated prices expose importers to volatility, especially when industrial demand is uncertain and downstream customers resist higher energy bills.

For Trump, a restoration of LNG sales would support producers along the Gulf Coast and reinforce his administration’s argument that expanded fossil fuel exports strengthen United States leverage. The country’s LNG export capacity is set to increase substantially by the end of the decade as new projects enter service, making long-term buyers in Asia essential to investment plans. China, with its large gas demand and state-backed importers, remains among the most important potential customers.

A deal is unlikely to be straightforward. Beijing will not want to appear dependent on United States energy, particularly after tariffs showed how quickly trade can become hostage to politics. Chinese buyers also remember earlier disruptions during the 2018-19 trade war, when tariffs choked off LNG flows and forced companies to rework supply portfolios. Long-term contracts require confidence that cargoes will not be priced out by another round of duties or restricted by sanctions and security measures.

Washington faces its own constraints. The Trump administration is seeking trade concessions while maintaining pressure on China over advanced technology, critical minerals, investment screening and market access. A narrow energy truce may be easier than a broader settlement, but it could still face scrutiny from hawks who see large-scale fuel sales as a bargaining chip that should be tied to wider Chinese commitments.

Commercial players are watching for signs of tariff relief, purchase targets or a managed trade mechanism that includes energy and agricultural goods. Even a limited reduction in Chinese levies could reopen the arbitrage for United States LNG, particularly if Gulf disruptions keep Asian prices high. State energy firms in China may initially favour spot or short-term arrangements rather than immediately committing to new multidecade contracts.