Meanwhile, the European Union (EU) is considering proposals to tighten its own methane emissions standards. The EU will make compliance as easy as possible for our American friends. This campaign in particular is aimed at stopping new liquefied natural gas (LNG) exports. The current geopolitical situation is difficult, with the energy crisis exacerbated following Russia’s invasion of Ukraine. Europe has an immediate need to find reliable energy sources to address the crisis and the transition ahead.
The US has significantly increased its LNG deliveries to Europe. By becoming the EU’s largest supplier, the US is assisting the continent wean itself off of Russian gas. The methane rule talks have major stakes. They could set precedents for future trade relations and regulatory compliance across the two entities.
Current Economic Landscape
As we have seen with the financial markets, reactions to that news were overwhelmingly positive to the idea of changing EU regulations. The most traded currency pair – EUR/USD – had a spectacular rally during Asian trading on Monday, with gains of greater than 1%. This was an important moment. The bilateral exchange rate went above the 1.1500 level for the first time since November 2021.
This general trend is a part of an overall shift as right now, the US Dollar has weakened significantly. Worries about an approaching US economic downturn are mounting. Continued debate around the Federal Reserve’s independence is adding to this downward pressure on the USD. Consequently, the USD/JPY pair has experienced a drop as well, breaking under 141.00. Trade-related uncertainties and geopolitical risks continue to support the Yen at the US dollar’s expense.
Methane Emissions Rule Adjustments
The EU’s current consideration of revising their methane emissions rules to prevent revisions from weakening previous standards is a good example. The proposed technical adjustments would allow US exporters to be recognized as compliant with “equivalent” methane standards to those enforced by the EU. This would simplify the regulatory landscape for US gas exports, making it easier for American suppliers to adhere to European laws.
The EU is already in desperate need of stable energy supplies as it gets off Russian gas. Yet, this change further heightens the need for these conversations. While the EU bolsters its own energy security, the EU benefits by supporting the US’s efforts to meet methane commitments. This shift helps strengthen trade relations with one of Ottawa’s most important suppliers.
Trade Policies and Future Implications
Looking forward, the tides of trade policies generally are flowing against neoliberal orthodoxy. The United States’ next presidential election, scheduled for November 2024, will be the major impetus for these changes. While different candidates stake out their platforms, we know that the economic competition will be front and center in what is becoming a crucial arena for international relations.
Former President Donald Trump has indicated his intention to utilize tariffs as a means of bolstering the US economy and supporting American producers during this election cycle. His approach has the potential to be extremely constructive in reshaping trade dynamics not just with Europe but with our other key trading partners.