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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