America's oil and gas boom is responsible for lowering the trade deficit by about $250 billion over the last decade, according to a new report from research firm IHS Markit.
Unfortunately, this economic success story might not last much longer. President Trump's "Section 232" tariffs on imported steel and aluminum are already threatening our energy exports.
The president has long promised to close America's trade gap. If that's truly his goal, he needs to call off his trade war before it does real damage to our most globally competitive industries.
America's surging oil and gas exports are the direct result of a historic domestic energy renaissance. New technologies have enabled the energy industry to extract previously inaccessible stores of fuel from shale rock formations through hydraulic fracturing, better-known as "fracking."
Thanks to these breakthroughs, domestic oil and gas production has increased by nearly 60 percent since 2008 -- making the United States the world's leading producer of petroleum and natural gas for the last five consecutive years.
According to the International Energy Agency, America will remain "the undisputed oil and gas producer in the world over the next several decades."
Not surprisingly, this glut of in-demand energy resources has spurred our export economy, as the IHS report makes clear. Between 2007 and 2017 -- a period in which trade deficits for other goods exploded -- the deficit for petroleum products actually plummeted by more than 75 percent, the report concluded.
Over the next five years, the report projects the trade imbalance for petroleum exports will fall by another $50 billion. And by early next decade, the nation could become a net petroleum exporter for the first time since 1949.
The Trump administration's tariff policies threaten this progress. This is especially true of his import duties on steel and aluminum. In imposing these tariffs, the president claims he is exercising powers granted to him under Section 232 of the Trade Expansion Act of 1962, which authorizes the executive to levy import duties in the interest of national security.
In reality, these tariffs run directly counter to our national interest by weakening some of America's most competitive industries, including the energy sector. It's often impossible for energy firms to "buy American." Many pipeline projects require pipes so large and wide that not a single American steel firm can produce them. All told, over three quarters of the steel used in oil and gas pipelines is imported.
Thanks to 232 tariffs, "most oil and gas pipeline construction projects would be delayed or stalled," according to global consulting firm ICF. The administration's protectionist tariff polices are also harming U.S. trade relations with some of our biggest petroleum customers -- like China.
In June, China threatened to impose a 25 percent retaliatory tariff on American crude oil. Although the country has yet to make good on that threat, it did suspend purchases of U.S. crude this August. And this September, the country issued a 10 percent tariff on U.S. liquefied natural gas (LNG).
Compared to the first half of this year, China is buying less U.S. LNG and diverting shipments to other countries. Between January and April, 14 U.S. LNG vessels reached China. May and June saw just one.
President Trump's tariffs are also already jeopardizing energy investment in the United States. Worried it won't be able to secure enough Chinese buyers, an Australian company is delaying its decision to invest in an LNG terminal project near Lake Charles, Louisiana.
Just as troubling, Trump's protectionism will likely undermine the global economy significantly in the coming months and years. The International Monetary Fund predicts that the president's tariffs will reduce global growth by .5 percent -- $430 billion -- by 2020.
And as the global economy becomes less dynamic, the demand for energy resources like oil and natural gas will slow, suppressing American energy exports in the process. Instead of closing the trade deficit, Trump's policies are weakening one of the few industries where net exports are on the rise.
For now, the best way to bolster domestic industries, including energy, is to roll back the 232 tariffs and let the global market for U.S. goods continue to thrive.
Drew Johnson is a senior fellow at the National Center for Public Policy Research.