April 11, 2025
The trade war between the US and China continues to escalate at a disturbing pace. As of April 10th, 2025, the US imposed 145% tariffs on Chinese exports to the US, while China retaliated with 84% levies on all US exports to China. The latter included 84% tariffs on US LPG exports and resulted in an immediate freeze of US LPG shipments to China.
China sourced 30% of LPG imports from the US in 2024, and China has become increasingly reliant on the US to meet its LPG import demand. If China sources less LPG from the US, this will result in reshuffled trade patterns for VLGCs, with recent volatility in VLGC spot rates expected to continue.
In our 2025 Q1 LPG/VLGC Market Report, we predicted tariffs would be imposed on LPG, so the latest introduction of tariffs on LPG has not come as a surprise. In our Low Case scenario, which called for a 65% cut of US LPG imports to China, we predicted spot rates in 2026 would fall by $26,000/day below rates in our Base Case scenario (which saw a more modest 45% average slash of US LPG imports to China).
However, the situation we are facing now is worse than our Low Case scenario predicted, and current VLGC spot rates are already reflecting this. VLGC spot rates for conventional vessels averaged $42,000/day in the first week of April. Immediately following the Chinese retaliatory increase to 84% tariffs on LPG, spot rates fell 63%, towards $15,000/day by April 10th amid a full stop in US-to-China LPG trade.
During the first Trump administration in 2018, China placed a 25% tariff on US LPG exports, causing US LPG shipments to China to cease completely. LPG shipments from the US to China later resumed after the two countries reached a trade agreement, and tariffs were lifted thereafter. During this time, VLGC spot rates actually improved from $16,000/day in the year leading up to tariffs (imposed in 2018 Q3), to $35,000/day in the year following the tariffs (through 2019 Q3).
The difference between then and now is that if China cuts its US LPG imports to zero, as it did in 2018-19, it will be unlikely to make up the full difference in imports from other suppliers (mainly the Middle East) in the near-term. A significant portion of volumes from the Middle East are already tied up with other buyers, and new Middle Eastern export capacity will be slow to come on stream over the next couple years.
In the near-term, China – the largest LPG importer globally – will either be forced to scale back on its overall LPG import growth, or it will have to import some LPG from the US. Currently, the latter appears unlikely, and this means we are likely to see lower LPG demand in China, and therefore the world.
This story is still developing and we are monitoring updates closely.
