06/09/2025 | Press release | Distributed by Public on 06/09/2025 13:06
Photo: Callaghan O'Hare/Bloomberg via Getty Images
Commentary by Philip Luck
Published June 9, 2025
On June 3, 2025, the U.S. Department of Commerce's Bureau of Industry and Security issued a notice of intent to deny export licenses for three ethane cargoes destined for China, targeting Enterprise Products Partners and signaling a broader crackdown on energy exports to the United States' largest trading partner. The Trump administration's new licensing requirements have effectively blocked what were previously unrestricted commodity shipments, forcing major U.S. energy companies to halt billions of dollars in planned exports while loaded tankers sit idle off the coast of Houston, Texas.
The ethane controls illustrate significant challenges in recent U.S. trade policy: They may inflict more damage on U.S. companies than Chinese competitors, undermine confidence in American supply reliability among allies, and advertise strategic incompetence that encourages adversaries while worrying partners. Rather than demonstrating U.S. resolve, these poorly conceived controls reveal a troubling pattern of assumption-based policymaking, devoid of rigorous analysis-exactly the kind of weakness that skilled Chinese negotiators will exploit in today's high-stakes trade discussions in London.
These controls fail to clear even the lowest bar for an economic weapon; if the goal is to weaponize trade, the weapon should inflict more damage on the target than the wielder. These ethane export controls hurt U.S. producers more than their Chinese counterparts, undermine the administration's own energy dominance agenda, signal to allies that the United States cannot be trusted even in supposedly apolitical commodity markets, and-perhaps most damaging of all-reveal a level of strategic incompetence that will encourage adversaries and worry partners for years to come.
What lessons can be learned from this episode? Beyond understanding what not to do next time, it demonstrates that forethought, analysis, and deliberate decision-making processes are critical to effective policy.
As senior U.S. and Chinese trade officials convene in London today, their discussions extend far beyond traditional tariff disputes. Both nations increasingly wield export controls as economic weapons, exploiting their respective dominance across different segments of global supply chains. The Trump administration's recent decision to require export licenses for ethane shipments to China exemplifies how not to deploy tools of economic statecraft.
The most glaring failure of the ethane export controls is their inability to meaningfully damage Chinese petrochemical capacity. Despite breathless rhetoric about national security, the numbers tell a sobering story of strategic irrelevance.
China imported approximately 227,000 barrels per day of U.S. ethane in 2024-a substantial volume representing nearly half of total U.S. ethane exports. At first glance, this might seem like significant leverage. But context matters. Ethane accounts for only 8-10 percent of China's total ethylene production feedstock, with the vast majority coming from naphtha (70 percent) and LPG (15-20 percent). Even if U.S. ethane disappeared entirely tomorrow, China would lose at most 5-6 percent of its ethylene capacity in the short term.
More critically, China's petrochemical infrastructure was built with exactly this kind of supply disruption in mind. The country's newest crackers utilize flexible furnace technology-particularly Linde's PyroCrack systems-that can switch between gas feeds (e.g., ethane) and liquid feeds (e.g., naphtha). This is not theoretical capability; it is engineered redundancy designed to handle, among other things, geopolitical volatility.
When U.S. ethane supplies are cut off, Chinese plants do not shut down-they simply burn more naphtha. Yes, this increases costs, but production is expected to continue largely uninterrupted. What interruptions this requirement will cause can be resolved within a matter of months. For a country that has weathered many trade wars, technology sanctions, and supply chain disruptions over the past decade, absorbing higher feedstock costs is hardly an existential threat.
Given the ineffectiveness of U.S. actions, China needs to do little to respond immediately. But that does not mean they will not react strategically. Economic weapons become less effective with every use as competitors adapt and de-risk their supply chains. Today, China still has some petrochemical infrastructure that requires ethane and cannot easily switch feedstocks. If China decides to continue purchasing U.S. ethane after this episode, they will certainly engineer their supply chains to remove whatever small leverage the United States had in this trade.
While China adjusts its feedstock mix at limited cost to its petrochemical industry, U.S. producers are facing much more significant supply chain disruptions. Not only are these disruptions entirely of Washington's own making, but they could have been anticipated by anyone who had bothered to understand ethane production.
With no other market able to absorb the volume, ethane prices have collapsed, domestic inventories are building, and loaded tankers are literally treading water off the coast of Houston, Texas, unable to deliver their cargo without the newly required export licenses. This represents roughly $2 million per day in lost export value-leaving other producers to partially fill the gap.
But the effect on prices and sales is just the beginning. Ethane is a byproduct of natural gas production. If producers cannot sell their ethane, they must pay to store it, flare it off (burning money), "reject" the ethane (keeping it in the natural gas stream, which poses problems for utilities and liquid natural gas (LNG) exporters), or reduce natural gas production. With U.S. ethane inventories already near record levels and limits on flaring due to environmental concerns, this export ban may soon cause significant challenges for U.S. energy producers.
The irony is palpable. The Trump administration came to power promising U.S. energy dominance, yet its own policies are now constraining domestic energy production and forcing U.S. companies to sell their products at fire-sale prices. The ethane export controls represent a direct contradiction of stated policy goals, inflicting measurable harm on U.S. energy companies in service of imaginary national security benefits.
Beyond the immediate economic damage, the ethane export controls send a deeply troubling signal about the United States' reliability as a supplier. Markets for energy and the countless number of chemical products that are derivates of U.S. fossil fuel production function on long-term contracts, massive infrastructure investments, and predictable regulatory frameworks. By retroactively imposing export licenses on previously unrestricted commodities, the United States has introduced a new element of political risk into what were considered among the most stable international trade relationships.
This matters enormously for U.S. competitiveness. When international buyers are choosing between U.S. ethane and alternatives from Qatar, Russia, or future suppliers, they now must factor in the possibility that Washington might simply cut off supplies for arbitrary political reasons.
Ethane is hardly a strategic commodity-it is primarily used to make plastics and chemicals with minimal military applications. If the United States is willing to weaponize ethane exports, what confidence can buyers have in U.S. supplies of liquid natural gas (LNG), crude oil, or other energy products?
The timing could hardly be worse. The United States is competing aggressively for market share in global LNG markets, where buyer confidence and long-term supply security are paramount. Countries including Japan, South Korea, and emerging Asian economies are making multibillion-dollar infrastructure investments based on assumptions about U.S. supply reliability. The ethane precedent suggests that these assumptions may be misplaced, potentially driving these buyers toward alternative suppliers.
European allies face a similar dilemma. Having been encouraged to reduce dependence on Russian energy supplies, they now must wonder whether U.S. alternatives come with their own political strings attached. The ethane controls may seem unrelated to European energy security, but they establish a pattern of behavior that undermines confidence in U.S. commitments across the board.
Perhaps the most damaging aspect of the ethane export controls is not their immediate economic impact but what they reveal about U.S. strategic thinking-or the lack thereof. Good economic statecraft requires careful analysis of vulnerabilities, precise targeting, and realistic assessment of costs and benefits. The ethane controls fail on every count.
The vulnerability analysis was superficial at best. Policymakers appear to have looked at trade flows showing substantial U.S. ethane exports to China and concluded this represented meaningful leverage. There is even evidence suggesting that since ethane was not a commodity that China chose to impose tariffs on, U.S. policymakers mistook this for evidence of a chokepoint and imposed controls based on that flawed assumption.
Even a cursory analysis would have uncovered the truth about China's overall feedstock mix, alternative supply sources, and technological flexibility. Such an analysis would have revealed that ethane dependence was neither deep nor irreversible. How can I be sure of this? Because I didn't know the first thing about ethane two days ago, yet the basic facts are readily available.
The targeting was equally poor. Rather than focusing on sectors where China lacks alternatives or faces genuine technological constraints, the controls targeted a commodity market where substitution is not only possible but built into the infrastructure design. This is strategic malpractice-the equivalent of trying to starve a country that maintains strategic grain reserves and has multiple agricultural suppliers.
Most fundamentally, the cost-benefit analysis appears to have been nonexistent. The controls impose immediate, quantifiable costs on U.S. producers while generating speculative and minimal benefits in terms of constraining China. Any honest assessment would have concluded that the policy was likely to be counterproductive.
The implementation has been similarly bungled. Rather than providing clear guidelines and reasonable transition periods, the Department of Commerce appears to have improvised export license requirements with little advance notice. Companies with loaded vessels suddenly found their cargoes stranded, creating immediate financial losses and legal complications.
This kind of policy improvisation does more than damage specific companies-it undermines the broader reputation of American institutions for competence and predictability. When foreign governments and companies assess the risks of doing business with the United States, they now must account for the possibility of arbitrary and poorly planned policy changes that can destroy value overnight.
The ethane export controls are unfortunately not an isolated incident but part of a broader pattern of trade policy amateurism, with policy driven by faulty assumption instead of credible analysis. While the second Trump administration is turning this into an art form, having served in the Biden administration, I can attest to this not being a new problem. From hastily implemented technology sanctions that harm U.S. companies more than their targets, to tariff policies that raise costs for American consumers while generating minimal foreign policy leverage, the United States has repeatedly demonstrated a concerning inability to design and implement effective economic statecraft.
Economic competition with China requires sophisticated, sustained, and strategically coherent policies. The Chinese system, for all its flaws, is capable of long-term planning and systematic implementation. Chinese policymakers study U.S. trade policies carefully, identify weaknesses and inconsistencies, and design responses that minimize damage while exploiting U.S. mistakes.
The ethane controls provide Beijing with valuable intelligence about Washington's decisionmaking processes. Chinese analysts can observe that U.S. policymakers were unaware of Chinese feedstock flexibility, failed to anticipate substitution possibilities, and imposed costs on U.S. companies without generating meaningful Chinese constraints. This information will inform Chinese preparations for future trade conflicts, potentially making U.S. economic pressure even less effective over time.
The ethane export control debacle offers several important lessons for future trade policy.
As Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and Trade Representative Jamieson Greer sit down with Chinese Vice Premier He Lifeng in London today, they carry the burden of the United States' recent trade policy failures. The ethane export controls represent everything wrong with contemporary U.S. economic statecraft: poor analysis, inadequate preparation, arbitrary implementation, and stubborn persistence in the face of obvious failure.
These talks come at a critical moment, with both sides trying to preserve a fragile truce while addressing fresh disputes over rare earth minerals and advanced technology. It will be nearly impossible for U.S. negotiators to credibly threaten economic consequences when their recent actions have hurt U.S. companies more than Chinese competitors, undermined alliance relationships, and raised questions about the effectiveness of current U.S. economic statecraft approaches
The American people deserve better from their government than policies that inflict costs on domestic producers while generating no meaningful benefits. The ethane export controls should be reversed, not as a favor to China, but as an act of basic competence in service of U.S. economic interests. In an era of genuine strategic competition, such self-inflicted wounds are too costly to bear, especially when they undermine the United States' position at the negotiating table.
Philip A. Luck is director of the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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