Asia, Tariffs, and Demand for US Energy Exports

Mobius Intel Brief:

Export-centric markets with substantial trade surpluses against the United States are facing the effects of a potential Trump 2.0 administration and its associated tariffs — downstream consequences of which include bullish tailwinds for US energy exports as countries race to offset trade imbalances.

• Key Intel: Currencies in major exporting markets like South Korea, India, and Japan are approaching or setting multi-year lows this week. Concerns about US trade policy with a second Trump administration are warranted by the US trade deficit widening to -$84.4 billion in September. Excluding 1H22, last month’s deficit was the widest on record. As observed during President Trump’s first term, these exporters will likely turn to US energy exports to offset trade imbalances — adding incremental tailwinds for US crude, product, and natural gas demand in 2025+.

Behind The Trade Surplus

Isolating trade in goods, the collective ‘Asia’ region accounted for nearly 64% of the US’ $1.1 trillion deficit last year, with the region’s $677B surplus nearly 195% larger than Europe’s.

Seven Asian nations accounted for more than 62.1% of the US’ total trade deficit in 2023. Trade surpluses for South Korea, Taiwan, and Vietnam ballooned by 395%, 153%, and 90% between 2019 and 2023, respectively, making these countries prime targets for tariff-related scrutiny.

As noted above, countries with significant trade surpluses against the United States during President Trump’s first term were responsible for an outsized share of demand for incremental US energy exports.

• For example, South Korea’s average daily crude and product imports from the US increased by approximately 517% from 86 Kb/d in 2015-2016 to 532 Kb/d in 2019-2020. According to BBG sources, South Korean officials plan to ‘urge’ firms to increase energy imports from the US to offset the country’s trade imbalance if this week’s election outcome favors President Trump.

Combined crude and product exports to the US’ top five Asian markets grew by 259% from a daily average of 613 Kb/d in 2015-2016 to an average of 2.2 MMb/d in 2019-2020. Exports to the US’ top five non-Asia markets grew 42% from 2.3 MMb/d to 3.29 MMb/d over the same period.

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