LITTLETON, Colorado, April 4 (Reuters) - Coal traders could become rare winners among businesses reeling from U.S. President Donald Trump's drastic new tariff regime that adds at least 10% to the cost of nearly all goods imported into the United States.

That is because energy providers across Asia - which has been hit with some of the highest new U.S. tariffs - will be under pressure to cut power costs for their consumers, which include many of the world's largest goods producers.

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By helping to lower operating costs for factories, Asia's utilities may allow manufacturers to sustain some sales to the world's largest importer, even with the new tariffs in place.

But in order to produce the cheapest power possible, Asian power producers will need to step up the use of coal and likely cut back on the use of pricier fuels in their generation mix.

That would be good news for coal traders and miners in the region, but likely bad news for regional emissions levels, which will only climb further as more coal gets burned for power.

HARDEST HIT

Most affected by the new U.S. tariff levels are the manufacturers of Asia, where China and Vietnam have been hit with new tariffs of 34% and 46%, respectively.

Between them, China and Vietnam are home to a major share of the global production of electronics, clothing, furniture and sporting goods that are regularly purchased by U.S. consumers.

Other Asian nations with large export-oriented manufacturing bases that have also been hit with steep new tariffs include Indonesia (32%), Cambodia (49%), Malaysia (24%) and the Philippines (17%).

Given the relatively soft state of consumer demand in the U.S. so far in 2025, companies will not be able to pass on much of the cost increase triggered by the tariffs to consumers without incurring a sharp drop in sales.

So, instead many companies may try to absorb at least some of the tariff impact themselves, and look for ways to reduce costs in order to maintain a profitable operating margin.

This widespread search for cost reductions will likely be aided by local governments, who will be eager to preserve jobs in the manufacturing sector despite the new hostile trade arena.

COAL FIX

Coal traders will happily volunteer to help in those cost-cutting endeavours by supplying power producers with extra volumes of thermal coal for electricity production.

Coal is by far the cheapest and largest source of thermal power production in Asia, and accounted for around 56% of regional electricity supplies in 2024, according to Ember.

Pollution reduction efforts have seen natural gas displace some coal output in certain countries, and accounted for around 10% of regional electricity supplies last year.

Going forward, however, coal will likely undergo a resurgence as utilities prioritise cost over all else in an effort to help manufacturers weather the tariff storm.

For coal traders, this will likely mean supplying higher volumes more regularly to major coal-burning hubs across the region.

And the region's largest manufacturers are already among the fastest-growing coal consumers in the world, according to data from global trade intelligence firm Kpler.

Indeed, in 2024 nearly all major manufacturing hubs in Asia recorded steep increases in coal imports from the year before, including China (10%), Vietnam (28%), Cambodia (26%), the Philippines (5%) and Malaysia (3%).

In addition, the import totals into those countries were all record highs in 2024, even as shipments to countries outside of Asia continue to decline.

This combination of growing demand among a narrowing group of consuming nations is good news for coal traders, who can optimize shipments to a relatively small number of destinations.

In 2025, thanks to the cost-cutting drive triggered by Trump's new tariffs, the coal volumes shipped to Asia's main markets will likely only climb higher still.

That means that even as Asia's production lines struggle to maintain margins with the new tariffs in place, coal traders can expect growth in both volumes and margins as the region's power system attempts to drive power costs as low as possible.

The opinions expressed here are those of the author, a market analyst for Reuters.

https://www.reuters.com/business/energy/coal-traders-could-be-rare-winners-trumps-tariff-turmoil-maguire-2025-04-04/