Broad and high tariffs could mean severe job loses and supply chain disruption for chemistry-using industries
Sweeping new trade tariffs introduced by US president Donald Trump in dramatic fashion on 2 April could devastate the already struggling chemical industry in the US and beyond.
A 10% baseline tariff will apply to imports into the US from all countries, with significantly higher ‘reciprocal’ tariffs for specific countries, including 20% on imports from EU nations and 10% on UK goods. South Korea and Japan will see 25% and 24% rates, respectively, while Chinese imports will attract a 34% tariff, on top of Trump’s already-applied 20% rate, for a punitive 54% total tariff.
Trump framed his ‘reciprocal’ tariffs as a response to tariffs and other trade barriers applied to US exports to those countries. In reality they emerge from simple calculations based on the US trade deficit (the value of US imports vs exports) with a given country.
Last month, Trump agreed to delay implementing threatened 25% tariffs on neighbours Canada and Mexico until 2 April. The White House has now clarified that Canadian and Mexican goods covered by the United States–Mexico–Canada Agreement (USMCA) will remain tariff-free, while those not included will be subject to 10–25% tariffs. Certain other classes of imports – including copper, pharmaceuticals, semiconductors and certain critical minerals – are temporarily exempt from the higher ‘reciprocal’ tariffs, but will still be subject to the base 10% tariff rate.
Chemical companies are already struggling, we’re in a manufacturing recession. This is not the time to increase their costs
The Alliance for Chemical Distribution (ACD), which represents US chemical distributors, is concerned. ‘The impacts of these tariffs are huge,’ Eric Byer, the organisation’s chief executive, tells Chemistry World. He says the new tariffs will mean US distributors have to increase prices, costing customers up to $1.25 billion (£960 million) a year, according to external economic analysis his organisation has received.
Further, Byer estimates that the chemical distribution industry could lose 8500 jobs directly and up to 40,000 jobs indirectly in the US and globally. ‘The lost wages because of the tariffs would be essentially about $2.5 billion dollars [a year],’ he continues. ‘Our members are very concerned.’
Conversations between ACD and its Canadian counterparts have revealed that distributors in Canada have been terminating positions since around mid-March in anticipation of the tariffs, Byer adds.
He emphasises that many key ingredients of products, such as the citric acid in Trump’s famous favourite Diet Coke, are predominantly imported into the US because of a lack of domestic manufacturing capacity and strict environmental or other regulations.
‘Deep uncertainty’
Byer anticipates that the new tariffs could create supply chain issues akin to those seen during the Covid-19 pandemic, with the cost of everyday items rising steeply over the coming weeks and months.
The US Society of Chemical Manufacturers and Affiliates (SOCMA) also issued a warning. ‘As this new tariff framework takes effect, speciality chemical manufacturers face deep uncertainty,’ the organisation stated on 3 April. ‘Many SOCMA members are now confronting significantly higher costs for the raw materials they rely on – inputs often unavailable at scale within the US.’
The US president has dealt the global economy another low blow. It is now important for everyone involved to keep a cool head
These sudden shifts are occurring in the context of ‘complex, global supply chains’ and ‘long-standing customer commitments’, the trade group noted.
Al Greenwood, deputy editor for the energy and chemicals consulting firm ICIS, agrees. ‘Chemical companies are already struggling, we’re in a manufacturing recession,’ he says. ‘This is not the time to increase their costs, it is also not the time to reduce demand for their products … when demand has already been suppressed for the past few years,’ Greenwood continues. ‘I can’t see any benefits to all of this.’
He is concerned about the prospect of a global trade war that could, for example, target US plastics and chemical exports, noting for example that the EU and Canada have each proposed retaliatory tariffs and China has threatened reprisal.
Meanwhile, many companies have already announced significant commitments to build plants in the US in the hopes of mitigating some effects of the new tariffs. These include pharmaceutical giants like Johnson and Johnson – which has pledged $55 billion, Eli Lilly – which has committed $27 billion to double its US manufacturing investment, and Merck – which plans to build a $1 billion facility.
At the moment, the German Chemical Industry Association (VCI) is urging the EU to stand together and speak with one voice. ‘The US president has dealt the global economy another low blow,’ stated VCI’s managing director, Wolfgang Große Entrup. ‘We regret the US government’s decision. It is now important for everyone involved to keep a cool head,’ he advised.
No comments yet