Natural Gas Market Outlook: Challenges and Perspectives Amid U.S. Protectionism

By: Daniela Casado

Trading Énestas

Introduction
In recent years, energy geopolitics has gained growing importance, particularly in highly interconnected regions like North America. The mutual dependence among the United States, Mexico, and Canada in the energy sector has been disrupted by unilateral policies that alter trade balances and risk driving up energy costs. In 2025, these tensions are especially evident in the natural gas market, a critical input for industry, transportation, and electricity generation.

Trade Tensions
Since early 2024, the U.S. has implemented a series of tariff measures targeting energy products and intermediate goods from Mexico and Canada, as part of a protectionist strategy aimed at revitalizing its domestic industry. These policies have caused diplomatic and economic frictions within the framework of the United States–Mexico–Canada Agreement undermining trilateral cooperation.

In energy terms, these tariffs increase the cost of importing specialized infrastructure components, such as pipelines, turbines, and valves, thereby hindering expansion or modernization projects in Mexico. Additionally, increased logistical costs resulting from strained trade relations negatively impact the flow of natural gas from the U.S., Mexico´s main supplier.

These measures suggest a pivot in U.S. industrial policy from globalization toward nearshoring with protectionist overtones. Mexico, traditionally seen as a manufacturing partner, may increasingly be treated as a competitor. The risk is not just economic but strategic—if Mexico and Canada perceive that energy interdependence is a vulnerability rather than a strength, they may seek to rebalance relations away from the U.S., potentially inviting other global players into the region.

Mexico’s Dependence on Imported Gas

Mexico currently imports over 70% of its natural gas, primarily through cross-border pipelines connected to southern Texas. This structural dependence places the country in a vulnerable position in the face of any commercial restrictions, whether due to tariffs, technical disruptions, or political decisions in the U.S.

This dependency limits Mexico’s ability to respond to price fluctuations, reducing its energy policy flexibility and increasing risks for key sectors such as manufacturing, transportation, and electricity generation—especially in combined cycle plants.

In energy terms, this resembles a form of asymmetric interdependence—where one party (the U.S.) has leverage and the other (Mexico) has vulnerability. This dynamic may become a bargaining chip in broader diplomatic negotiations, affecting not just energy but also immigration, security, and trade. Addressing this imbalance will require long-term strategic investment and a rethinking of Mexico’s energy mix, possibly including more aggressive renewable energy development as a hedge.

Regional Perspective
The outlook for the natural gas market in North America is uncertain and volatile. While existing infrastructure allows for continued energy flows between countries, the lack of stable multilateral agreements and the rise of protectionism hinder effective cooperation. Mexico is likely to face higher prices and reduced gas availability, with consequences for its trade balance and energy security.

The future of the North American natural gas market hinges on whether regional leaders choose to rebuild integration or entrench fragmentation. In the absence of trust and predictable policy frameworks, each country may seek to insulate itself from others’ decisions—an approach that could raise costs and reduce efficiency across the board.

The current trajectory suggests a shift from “energy interdependence” to “energy compartmentalization.” If sustained, this could limit economies of scale, reduce investment incentives, and fragment infrastructure planning. Multilateral mechanisms must evolve to handle these new tensions, or risk becoming irrelevant.

Recommendations
1. Modernize Infrastructure: Enhancing the efficiency and resilience of national energy infrastructure, with a focus on strategic gas storage and distribution networks. A national gas storage policy could serve as a strategic buffer during supply disruptions.

2. Regional Energy Policy Coordination: Reinforce trilateral dialogue spaces to address energy challenges from a regional perspective. A
trilateral energy security framework could be explored to manage shared risks, especially in crisis scenarios.

3. Fracking: In the context of rising energy prices and global supply uncertainty, Mexico should reconsidered fracking activities. Benefits could include reduced dependence on U.S. gas imports, increased domestic production capacity, and new investment opportunities.

Conclusions
The North American natural gas market is undergoing significant transformation due to geopolitical, economic, and environmental factors. In 2025, U.S. protectionism acts as a catalyst for uncertainty, weakening regional integration and putting Mexico’s energy security at risk. In this context, it is imperative to adopt a stronger national and regional strategy combining diversification, investment, and cooperation.

Natural gas in North America is no longer just a commodity, it’s a geopolitical instrument. U.S. protectionism challenges the foundational logic of regional integration, exposing Mexico’s structural energy vulnerabilities. To respond effectively, Mexico needs to transition from a reactive to a proactive strategy—embracing diversification, investment, and regional diplomacy. A fragmented North American energy landscape will serve no one in the long term.