The Propane Trade Truce: A False Calm for U.S. Exporters—Where to Invest Now

The temporary truce in the U.S.-China trade war, which slashed retaliatory tariffs to 10% for 90 days starting in May 2025, has been hailed as a reprieve for global markets. But for investors in U.S. propane exporters, this pause is anything but a permanent solution. With the tariffs set to revert to punitive levels by August unless extended, the vulnerability of U.S. propane terminals—and the companies that rely on China's demand—is starkly exposed. Meanwhile, Middle Eastern and Canadian suppliers, along with petrochemical firms unshackled from U.S. export dependency, are positioned to thrive. Here's why the next 90 days are critical for repositioning your portfolio.

The Fragile U.S. Propane Export Model

U.S. propane terminals like Enterprise Products Partners (EPD), Energy Transfer (ET), and Targa Resources (TRGP) have long relied on China's insatiable appetite for energy. Before the trade war, China accounted for 17.5% of U.S. propane exports, averaging 310 Mb/d in 2024. But when tariffs spiked to 125% in April 2025, 78% of scheduled Q2 exports became economically unviable. The result? U.S. propane prices collapsed by 42%, storage facilities filled to 92% capacity, and producers were forced to curtail output.

The truce may offer a temporary lifeline, but the underlying risk remains: these companies are hostage to geopolitical whims. If tariffs reset to 54% or higher in August, their revenue streams could evaporate again. EPD alone saw its propane segment revenue plunge 31% in Q2 2025—a warning sign for investors.

Why the Middle East and Canada Are Winning the Propane Game

While U.S. exporters teeter, Middle Eastern and Canadian suppliers are capitalizing on the chaos.

The Middle East:
- Qatar, Saudi Arabia, and the UAE have seized market share by offering propane at $480/ton, compared to U.S. prices of $620/ton under tariffs.
- Their infrastructure investments (e.g., Qatar's $100B LNG expansion) and proximity to Asian markets give them a 20-30% cost advantage.
- Investment Play: Look to Middle Eastern state-owned firms like Saudi Aramco or Qatar Petroleum, or international traders such as Vitol, which are scaling LPG operations.

Canada:
- Proximity to the U.S. and existing pipeline infrastructure make Canadian propane a low-cost, tariff-free alternative to U.S. Gulf Coast exports.
- Canadian producers like Pengrowth Energy and Canadian Natural Resources are expanding export capacity, targeting U.S. Midwest and European markets.

Petrochemical Firms with Diversified Supply Chains

The real winners are petrochemical companies that no longer depend on U.S. propane. Take Sinopec, which has adopted a three-pronged sourcing strategy: Middle Eastern contracts, domestic production, and Russian LNG. Similarly, Formosa Plastics (Taiwan) and INEOS (Europe) are locking in supply from non-U.S. sources, insulating themselves from trade volatility.

Hedging Strategies for the Next 90 Days

With the tariff truce expiring in August 2025, investors have a narrow window to adjust portfolios:

1. Short U.S. Terminal Operators:

2. EPD, ET, and TRGP are leveraged to Chinese demand. If tariffs reset, their stocks could mirror Q2's 31% revenue decline.

3. Long Middle Eastern/Canadian Suppliers:

4. Qatar Petroleum, Saudi Aramco, or Canadian firms with export exposure (e.g., Pengrowth) offer safer bets.

5. Buy Diversified Petrochemical Players:

6. Sinopec, INEOS, or LyondellBasell (which sources globally) are less vulnerable to supply chain disruptions.

7. Consider Propane ETFs with Geographic Diversification:

8. Funds like GMLP (Global Midstream Energy Fund) include Canadian and international assets, though investors should analyze their exposure to U.S. terminals.

The Bottom Line: A 90-Day Window to Diversify or Perish

The U.S.-China propane trade truce is a stopgap, not a solution. Investors who cling to U.S. terminal operators risk being blindsided if tariffs escalate again. Middle Eastern and Canadian suppliers, along with petrochemical firms with diversified supply chains, are the clear winners in this new era of fragmented energy markets. The clock is ticking: use the next 90 days to pivot away from U.S. export vulnerability—or risk being left holding the propane can.

Data sources: U.S. Energy Information Administration, Reuters, company earnings reports.