CORRECTED: INSIGHT: US tariffs unleash higher costs to nation’s chem industry
Al Greenwood
03-Feb-2025
Correction: In the ICIS story headlined “INSIGHT: US
tariffs unleash higher costs to nation’s chem industry”
dated 3 February 2025, the wrong volumes were used for the
following imports: Canadian ethylene-alpha-olefin
copolymers, having a specific gravity of less than 0.94;
Canadian polyethylene having a specific gravity of 0.94 or
more, in primary forms; Canadian polyethylene having a
specific gravity of less than 0.94, in primary forms;
Canadian polypropylene, in primary forms; Canadian mixed
xylene isomers; Mexican polypropylene, in primary forms;
and Mexican cyclohexane. The US did not import cyclohexane
from Mexico in 2023. A corrected story follows.
HOUSTON (ICIS)–The tariffs that the US will impose on all imports from Canada, Mexico and China will unleash higher costs for the nation’s chemical industry, create supply-chain snarls and open it to retaliation.
- For Canada, the US will impose 10% tariffs on imports of energy and 25% tariffs on all other imports.
- For Mexico, the US imposed 25% tariffs on all imports but the countries’ presidents said on Monday the tariffs are being paused for a month.
- For China, the US will impose 10% tariffs on all imports.
US IMPORTS LARGE AMOUNTS OF PE FROM
CANADA
US petrochemical
production is concentrated along its Gulf
Coast, which is far from many of its
manufacturing hubs in the northeastern and
midwestern parts of the country.
As a result, individual states import large amounts of polyethylene (PE) from Canada – even though the nation as a whole has a large surplus of the material.
Even Texas imports large amounts of PE from Canada – despite its abundance of plants that produce the polymer.
In addition, polyester plants in North and South Carolina import large amounts of the feedstocks monoethylene glycol (MEG) and purified terephthalic acid (PTA) from Canada.
The US as a whole imports significant amounts of polypropylene (PP) and polyvinyl chloride (PVC) from Canada – again, despite its surplus of these plastics.
The following table lists some of the main plastics and chemicals that the US imported from Canada in 2023. The products are organized by their harmonized tariff schedule (HTS) code.
HTS | PRODUCT | MEASUREMENT | VOLUMES |
3901.40.00 | Ethylene-alpha-olefin copolymers, having a specific gravity of less than 0.94 | kilograms | 1,319,817,405 |
3901.20.50 | Polyethylene having a specific gravity of 0.94 or more, in primary forms | kilograms | 1,088,071,523 |
3901.10.50 | Polyethylene having a specific gravity of less than 0.94, in primary forms | kilograms | 420,561,390 |
2917.36.00 | Terephthalic acid and its salts | kilograms | 407,710,439 |
2905.31.00 | Ethylene Glycol | kilograms | 329,542,378 |
3902.10.00 | Polypropylene, in primary forms | kilograms | 271,201,880 |
3904.10.00 | Polyvinyl chloride, not mixed with any other substances, in primary forms | kilograms | 188,800,413 |
2902.44.00 | Mixed xylene isomers | liters | 746,072 |
2905.12.00 | Propan-1-ol (Propyl alcohol) and Propan-2-ol (isopropyl alcohol) | kilograms | 87,805,095 |
3901.30.60 | Ethylene-vinyl acetate copolymers | kilograms | 71,372,396 |
Source: US International Trade Commission (ITC)
IMPORTS FROM
MEXICO
Mexico is not as large of
a source of US petrochemical imports as Canada,
but shipments from the country are still
noteworthy.
The following table lists some of the main plastics and chemicals that the US imported from Mexico in 2023.
HTS | PRODUCT | MEASUREMENT | VOLUMES |
2917.36.00 | Terephthalic acid and its salts | kilograms | 69,230,708 |
3901.10.50 | Polyethylene having a specific gravity of less than 0.94, in primary forms | kilograms | 34,674,435 |
2915.24.00 | Acetic anhydride | kilograms | 25,294,318 |
3904.10.00 | Polyvinyl chloride, not mixed with any other substances, in primary forms | kilograms | 24,005,371 |
2915.31.00 | Ethyl acetate | kilograms | 18,855,544 |
3901.20.50 | Polyethylene having a specific gravity of 0.94 or more, in primary forms | kilograms | 14,469,582 |
3902.10.00 | Polypropylene, in primary forms | kilograms | 8,849,478 |
Source: US International Trade Commission (ITC)
IMPORTS FROM CHINA
China
remains a significant source for a couple of
noteworthy chemicals despite the effects of the
tariffs that US President Donald Trump imposed
during his first term in office. The following
table shows 2023 US imports from China.
HTS | PRODUCT | MEASUREMENT | VOLUMES |
29152100 | Acetic acid | kilograms | 21,095,566 |
39093100 | Poly(methylene phenyl isocyanate) (crude MDI, polymeric MDI) | kilograms | 206,642,886 |
Source: US International Trade Commission (ITC)
China’s shipments of plastics goods are more significant.
OIL TARIFFS WILL HIT US
REFINERS
Canada and Mexico are
the largest sources of imported crude oil in
the US, and the heavier grades from these
countries complement the lighter grades that
the US produces in abundance.
Those imports help fill out refining units that process heavier crude fractions, such as hydrocrackers, cokers, base oil units and fluid catalytic cracking (FCC) units.
Refiners cannot swap out heavier Canadian and Mexican grades with lighter US grades. Instead, they will need to pay the tariffs or find another supplier of heavier grades, possibly at a higher cost.
The following table shows the largest sources of imported crude in 2023. Figures are listed in thousands of barrels/day.
COUNTRY | IMPORTS | % |
Canada | 3,885 | 59.9 |
Mexico | 733 | 11.3 |
Saudi Arabia | 349 | 5.4 |
Iraq | 213 | 3.3 |
Colombia | 202 | 3.1 |
Total US imports | 6,489 |
Source: Energy Information Administration (EIA)
US refiners could take another hit from higher catalyst costs. These are made from rare earth elements, and China remains a key source.
TARIFFS TO RAISE COSTS FOR
FERTILIZER
Canada is the world’s
largest producer of potash, and it exports
massive amounts to the US. It is unclear how
the US could find another source. Russia and
Belarus are the world’s second and third
largest potash producers.
Together, the three accounted for 65.9% of
global potash production in 2023, according to
the Canadian government.
Canada accounts for significant shares of other US imports of fertilizers. The following table lists some of Canada’s fertilizer shipments to the US in 2023 and shows its share of total US imports. Figures are from 2023.
HTS | PRODUCT | MEASUREMENT | VOLUME | % |
31042000 | Potassium chloride | metric tonne | 11850925 | 88.8 |
31023000 | Ammonium nitrate, whether or not in aqueous solution | metric tonne | 295438 | 76.6 |
31024000 | Mixtures of ammonium nitrate with calcium carbonate or other inorganic nonfertilizing substances | metric tonne | 29203 | 75.7 |
31055100 | Mineral or chemical fertilizers, containing nitrates and phosphates | metric tonne | 1580 | 66.1 |
31022100 | Ammonium sulfate | metric tonne | 947140 | 49.6 |
31052000 | Mineral or chemical fertilizers, containing the three fertilizing elements nitrogen, phosphorus and potassium | metric tonne | 147850 | 41.4 |
Source: US ITC
SUPPLY CHAIN SNARLS
If US
companies choose to avoid the tariffs and seek
other suppliers, they could be exposed to
delays and supply chain constraints. Other
companies outside of the petrochemical, plastic
and fertilizer industries will also be seeking
new suppliers.
The scale of these disruptions could be significant because Canada, Mexico and China are the largest trading partners in the US.
The following table lists the top 10 US trading partners in 2023 based on combined imports and exports.
Country | Total Exports ($) | General Imports ($) | TOTAL |
Mexico | 322,742,472,406 | 475,215,965,697 | 797,958,438,103 |
Canada | 354,355,997,349 | 418,618,659,183 | 772,974,656,532 |
China | 147,777,767,493 | 426,885,009,750 | 574,662,777,243 |
Germany | 76,697,761,127 | 159,272,068,221 | 235,969,829,348 |
Japan | 75,683,130,214 | 147,238,042,342 | 222,921,172,556 |
South Korea | 65,056,093,590 | 116,154,470,335 | 181,210,563,925 |
UK | 74,315,228,810 | 64,217,031,774 | 138,532,260,584 |
Taiwan | 39,956,725,574 | 87,767,403,487 | 127,724,129,061 |
Vietnam | 9,842,922,146 | 114,426,076,081 | 124,268,998,227 |
Source: US ITC
RETALIATION
US
petrochemical exports would be tempting targets
for retaliation because of their magnitude and
the global capacity glut. China, in particular,
could impose tariffs on US chemical imports and
offset the disruptions by increasing rates at
under-utilized plants.
So far, none announced plans to target chemicals on Sunday.
Canada’s plans to impose 25% tariffs on $30 billion in US goods does not include oil, refined products, chemicals or plastics. That batch of tariffs will take place on February 4.
Canada will impose 25% tariffs on an additional $125 billion worth of US goods following a 21-day comment period, it said. The government did not highlight plastics or chemicals in this second batch of tariffs. Instead, it said the tariffs will cover passenger vehicles and trucks, including electric vehicles, steel and aluminium products, certain fruits and vegetables, aerospace products, beef, pork, dairy, trucks and buses, recreational vehicles and recreational boats.
In a statement issued on Sunday, Mexico’s president made no mention of retaliatory tariffs. Instead, she said she will provide more details about Mexico’s response on Monday.
China said it will start legal proceedings through the World Trade Organization (WTO) and take corresponding countermeasures.
RATIONALE BEHIND THE
TARIFFS
The US imposed the
tariffs under the nation’s International
Emergency Economic Powers Act (IEEPA), which
gives the president authority to take actions
to address a severe national security threat.
In a fact sheet, Trump cited illegal
immigration and illicit drugs.
Saturday’s executive order is the first time that a US president imposed tariffs under IEEPA. Prior IEEPA actions lasted an average of nine years. They can be terminated by a vote in Congress.
Insight article by Al Greenwood
(Thumbnail shows containers, in which goods are commonly shipped. Image by Shutterstock)
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