Impact of US-China Trade War on Trinidad and Tobago

Introduction to the Issue

PORT OF SPAIN, Trinidad, CMC—The Energy Chamber of Trinidad and Tobago says the chaos in global trading networks created by the United States tariffs and the trade war between the world’s two biggest economies has serious implications for the country.

It said the most immediate impact was the sharp drop in oil prices, with benchmark Brent dropping from close to US$75 a barrel at the beginning of April to US$64 by the end of last week. The Energy Chamber said this drop was in response to the economic uncertainty created by the tariffs and an Organization of Petroleum Exporting Countries (OPEC) decision to increase production.

Economic Implications

It said that while Trinidad and Tobago is primarily a gas-based economy, with gas accounting for almost 90 percent of hydrocarbon production on an energy equivalence basis, oil is still an important source of government revenue through petroleum profits taxes, supplemental petroleum taxes, royalties, and dividends from state-owned Heritage Petroleum.

This fiscal year’s annual government revenue estimates were based on an oil price of US$77.80 per barrel.

The new LNG pricing formulas agreed between the government and the Atlantic shareholders, based on a combination of Asian and European LNG benchmark prices and Brent crude prices, mean that the lower oil prices will also impact the country’s Liquified Natural Gas (LNG) export prices.

The Energy Chamber said Japanese and European LNG prices have also retreated, though they remain at historically high levels, above US$10 per MMBtu, compared to Henry Hub prices in the US$3.50 range.

Impact on Methanol and Ammonia Prices

It said that the 2025 government revenue estimates were based on an average wellhead price of US$3.59, a combination of both LNG marketing contract prices and domestic gas prices covering a range of contracts.

“Methanol prices typically broadly follow global economic ups and downs, given that demand for methanol is closely correlated with economic activity. It is an important basic chemical input into a broad range of products.”

The Energy Chamber said methanol prices were relatively high in the first quarter of 2025, but a global downturn may cause significant downside risk over the next few months.

“Methanol exports from Trinidad to the USA would be subject to the new ten percent import tariffs, but it is unclear how this will impact the market, especially as the US is not a particularly important market for Trinidad methanol.”

Regarding ammonia, the Energy Chamber said that Trinidad is an important producer for the US, accounting for over 40 percent of imported ammonia into the US.

“Despite the tariff imposition, ammonia markets have remained relatively muted. With most ammonia production going into fertilizers, the impact of

“Urea prices in the US rose last week in response to the tariffs with some urea-producing countries being threatened with the higher reciprocal tariffs) but it is unclear how they will respond in the future. It might take a while for the whole picture to emerge. ”

Supply Chain Disruptions and Inflation

However, the Energy Chamber said that one positive effect of lower oil prices is that the price of imported gasoline, diesel, and jet fuel should also decline. However, it needs to be remembered that we export approximately two times more crude oil than we import petroleum products.

The implications of global trade and economic uncertainty go beyond falls in commodity prices. One crucial factor is how the trade war between the US and China and the 10 percent tariff on US imports might disrupt supply chains. With so many imports coming from or through the United States, inflation caused by the new tariffs will inevitably flow through to the Caribbean.

“While food inflation is the issue that will probably hit the average citizen first and most obviously, there are also implications of the supply chain disruptions for the energy sector.

“China is an essential manufacturer of many components that go into equipment and other supplies used in the energy sector. If those items are assembled in the US, the unprecedented tariffs placed on Chinese imports into the US will lead to significant price increases.

“The danger is that this will push up costs in the Trinidad energy sector, especially for anything sourced from the US. The energy sect,” the Energy Chamber added.

Companies may look for alternatives or purchase directly from Chinese, European, or other Asian suppliers. A few Trinidadian manufacturers, such as IAL Engineering, who can produce some items for supply to domestic and regional markets, may have some upside potential.

“The general sense of uncertainty will inevitably lead to many companies delaying investment decisions. Confidence is an important commodity in any business, and it is in short supply worldwide and in Trinidad and Tobago,” the Energy Chamber said.

Conclusion

In conclusion, the US-China trade war has significant implications for Trinidad and Tobago, including a drop in oil prices, potential disruptions to supply chains, and inflation. The Energy Chamber has highlighted the need for companies to be aware of these risks and to explore alternative suppliers and markets.