US tariffs spark fears in Chile about even higher industrial goods imports

SAO PAULO (ICIS)–US import tariffs on China and other Asian countries are increasing fears in Chile that even higher amounts of imports will dent domestic plastics and wider manufacturing producers’ competitiveness, according to the CEO at the country’s plastics trade group Asipla.

• ‘Tremendously chaotic’ situation sparked by US makes forecasts futile
• Chile’s economy more ‘dynamic’ than expected, says central bank
• Potential global slowdown could derail course

Asipla’s Magdalena Balcells said to ICIS making forecasts has become difficult due to the “tremendously chaotic” situation regarding US tariffs but said that even with the 90-day pause to tariffs on some Asian countries, the 10% US tariff remaining in place could already impact Chilean producers.

Over the weekend, the White House also announced some exemptions for electronic goods, a key demand from US technological majors such as Apple which have important operations in China and elsewhere in Asia.

Petrochemicals and plastics producers in Chile and the wider Latin America have been under pressure for years as global oversupply for many products intensified with new capacities coming on stream in the US, Asia and the Middle East.

EXACERBATE CHILE COMPETITIVE ISSUES
“Even with the current, temporary US 10% import tariff, there are fears that countries subject to that tariff will aim to export to countries without that tariff burden, which will exacerbate Chile’s competitiveness problems with products coming from Asia. Now, products which didn’t arrive here may start reaching us with greater force,” said Balcells.

“Another issue is what will happen with raw materials that won’t be able to reach the US. This is set to cause changes in the market, because China is now a big producer of raw materials. We will have to continue monitoring the effects in what admittedly is a scenario of chaos created by the actions of [US President Donald] Trump. Amid this chaos, it’s very difficult to predict anything.”

In a written response to ICIS, Jorge Gaete, head of logistics Chile’s sole producer of polypropylene (PP) Petroquim, said the company does not forecast an impact in its operations “for now” but pointed to a potential wider economic slowdown as a worry.

“The US tariffs are a huge issue indeed. The 10% in place can affect some markets such as fruits, wine and pulp, although not copper [Chile’s main export], which is exempt from the 10% tax,” said Gaete.

“However, with the fall in global stock markets from Asia to Wall Street, we will be greatly affected as a country, since most of our investments are invested there [in US assets].”

‘SIGNIFICANT RISE IN UNCERTAINTY’
Last week, Chile’s central bank said the external outlook had “become more complex, with a significant rise in uncertainty” as geopolitical tensions escalated, and the US imposed its “first set” of tariff measures.

The minutes from the last monetary policy committee in March, which voted to keep interest rates unchanged at 5%, showed central bankers’ increasing concerns about the external environment potentially hitting the Chilean economy in coming months.

This could derail an economy which, the bank said, had been “more dynamic than expected” at the end of 2024 and start of 2025, with final GDP figures for last year putting growth at 2.6%, above the 2.3% projected in December.

“Concerns about global growth had increased, especially in that economy [the US], where services inflation also continued to persist. This combination of lower growth and greater inflationary pressures created a complex outlook for the [US central bank the] Federal Reserve,” said the Banco Central de Chile.

“The evolution of global financial markets was notable, with patterns markedly different from other episodes of tension. Part of this was because the economic repercussions of the tariff measures were estimated, for now, to be more significant in the US than in other countries. Thus, in the former, doubts about future growth and a preference for safe assets had given way to a stock market decline and a reduction in long-term rates.”

External shocks allowing, the bank said Chile’s inflation should converge towards the 3% target in coming quarters, although it remained “elevated”.

By the time the committee met in March, the latest annual inflation rate figure available was for February, at 4.7%. However, inflation ticked up to 4.9% in March, according to the Chile’s statistical office INE earlier in April.

The latest data available for economic output, covering February and published on 1 April, showed Chile’s petrochemicals-intensive manufacturing output rose by 1.7%, compared with February 2024.

However, according to the central bank’s reference Monthly Economic Activity Index (Imacec), Chile’s overall economic output fell by 0.1% in February due to a 7.4% fall in mining activity and a major power outage which hit some industrial facilities.

Front page picture: City of Valparaiso and its port, one of Chile’s largest
Picture source: Valparaiso Port Authority 

Focus article by Jonathan Lopez