INSIGHT: Global chemical prices plunge with oil amid tariffs

HOUSTON (ICIS)–The tariffs imposed by the US and the uncertainty of what will follow has caused a crash in oil prices and is one of the main factors behind a global decline in chemical prices in the days after the country’s April announcement of its reciprocal tariffs.

The following chart shows the sharp declines among the seven building-block chemicals.

Notably, the declines continued even after the US paused the implementation of the higher reciprocal tariffs and settled for the relatively lower 10% rate against most countries.

The exception is China, which has been responding to US tariffs with matching rates. The two countries are now imposing triple-digit tariffs on each others’ imports.

While the US has made exceptions for critical minerals, pharmaceuticals and electronics, China has made none. China’s tariffs include the large amounts of natural gas liquids (NGLs) that it imports as feedstock for its propane dehydrogenation (PDH) units and its ethane crackers.

LOWER OIL PRICES
Prices for plastics and petrochemicals tend to rise and fall with those for oil.

Oil prices have been falling since the start of the year, but the decline accelerated rapidly following the April tariff announcements by the US, as shown in the following table. Figures are in dollars per barrel.

	2-Jan	1-Apr	14-Apr
Brent	75.93	74.49	64.88
WTI	73.13	71.20	61.53

The decline was remarkable because it happened despite the weakening of the US dollar. The US dollar index has fallen by 8% as of 14 April since the start of the year. Oil prices tend to rise when the dollar weakens.

This relationship has broken down in part because of plans by OPEC and its allies (OPEC+) to increase May production by an amount much higher than anticipated.

But another reason is lower demand. Following the reciprocal tariff announcement by the US, ICIS lowered its forecast for global oil demand by 10%. ICIS also lowered its forecast for Brent oil prices for the rest of the year.

Lower oil prices are manifesting themselves in aromatics markets, which are closely tied to crude.

Export declined month on month for toluene and other aromatics from South Korea to the US for gasoline blending for March loading.

Prices of toluene in India tumbled to fresh three-year lows.

FALLING CHEM DEMAND
Demand for plastics and chemicals also tends to rise and fall with the economy.

Economists have started lowering their forecasts for growth, according to a periodic survey conducted by The Wall Street Journal. Survey participants also increased the chances of a recession.

Tariffs will act like a sales tax. Companies and consumers will treat the tax like any other – they will take steps to avoid it by purchasing fewer goods.

If one applied the US baseline tariff of 10% to the $3.3 trillion of goods the US imported in 2024, that comes to $3.3 billion in taxes.

That represents a lot of potential purchases that US companies and consumers could defer or abandon.

RPM International, a US producer of coatings, adhesives and sealants, expects that the slow- to no-growth environment of the past 18 months will persist. RPM’s comments are notable because they were made on 8 April, after the US announced its reciprocal tariffs.

UNCERTAINTY
Uncertainty is starting to paralyze some key chemical end markets.

The auto industry in the US is already showing signs of this, RPM said.

In European polyethylene (PE) markets, buyers are retreating to the side lines rather than committing to volumes in the current climate.

“All in all, people are being careful, and that’s not just converters that also consumers. People are worried about the future, and it’s probably affecting demand further down chain as well,” said ICIS markets editor Ben Monroe-Lake.

“All in all, people are being careful, and that’s not just converters that also consumers. People are worried about the future, and it’s probably affecting demand further down chain as well.”

REDIRECTED TRADE FLOWS
By imposing such broad tariffs, the US has erected a formidable trade barrier around its economy, which has caused exporters to redirect their shipments to other markets.

This is especially true of Chinese exports. The US has created an effective embargo of Chinese imports by increasing its tariffs by 145% in 2025. Even with the recent exemptions adopted by the US, a large portion of Chinese imports will need to find new markets. The following table shows 2024 US general imports from China. Figures are in US dollars.

Chapter	Description	Value
29	Organic chemicals	8,519,224,570
39	Plastics and plastic products	19,290,918,758
All Chapters	Total	438,947,386,145

Source: US International Trade Commission (ITC)

Similarly, China’s 125% tariffs on shipments from the US would cause a large amount of products to be redirected, as shown in the following table. Figures are in US dollars.

Chapter	Description	Value
27	Coal; mineral fuels, oils and products	14,727,138,106
29	Organic chemicals	3,980,594,815
39	Plastics and plastic products	7,452,840,887
All Chapters	Total	143,545,739,507

Source: US ITC

Given the tariff rates, it’s likely that direct trade between the US and China will crater, said Lynn Song, chief economist, Greater China, at ING.

Re-arranging global trade flows on such a scale will affect local chemical markets directly and indirectly through the influx of end products made with plastics and chemicals.

The world was already contending with an oversupply of chemicals. This will aggravate it

Such concerns have already appeared in east Chinese markets for certain grades of linear low density polyethylene (LLDPE) and high density polyethylene (HDPE), which reached multi-year lows.

Market players are worried that US tariffs will cause a decline in demand for Chinese products that use these plastic grades.

Similar concerns are arising in the Middle East among buyers and sellers of polymeric methylene diphenyl diisocyanate (PMDI)

US auto tariffs could cause producers in the rest of the world to reduce output of vehicles and parts. These auto tariffs are global, and they are separate from the reciprocal tariffs. As such, the US auto tariffs are still in effect.

If auto producers lower output, that will reduce demand for plastics and chemicals used in auto production, such as polypropylene (PP), nylon, butadiene (BD), and styrene butadiene rubber (SBR)

“I may have to tweak my operations if I lose access to the US market, and if so, certainly I would be prudent now not to overcommit on forward deliveries of raw materials including EPDM,” said an auto parts maker in southeast Asia. Ethylene Propylene Diene Monomer (EPDM) refers to a synthetic rubber.

DEFLATIONARY SPIRAL
If companies expect declines to continue, then they may postpone purchases, setting off a deflationary spiral, in which sellers lower prices each time buyers defer purchases.

Such a dynamic could emerge in European ethylene market and its PP market.

US TARIFFS COULD MAKE THE COUNTRY THE EXCEPTION
Although US prices for building blocks have fallen since the April tariff announcement, many have still raised their expectations for inflation.

RPM said on 8 April that the tariffs announced at that time would raise its raw material costs for its US operations by 4.3%. RPM’s forecast did not take into account the 90-day pause on tariffs that the US announced on 9 April.

That said, others are expecting prices in general to increase. Seasonally adjusted, a net 30% of US small business owners planned price hikes in March, up one point from February and the highest reading since March 2024.

CHINA’S NGL TARIFFS MAY CREATE US GLUT
China’s tariffs of 125% do not carve out any exemptions for ethane, liquefied petroleum gas (LPG) or other natural gas liquids (NGLs). China imports large amounts of these feedstocks from the US

If China maintains the tariffs on NGLs, it could cause a supply glut of these primary chemical feedstocks in the US. The country does not have the chemical capacity to absorb the shipments that would normally go to China, and it is unlikely that the rest of the world can fully offset the loss of China as an export destination.

If China maintains its tariffs on US NGLs, ICIS expects that US ethane and propane prices will decline.

Insight article by Al Greenwood

Additional reporting by Vicky Ellis, Ajay Parmar, Nurluqman Suratman, Isaac Tan, Nel Weddle, Melanie Wee, Kojo Orgle and Jonathan Yee

Infographics by Yashas Mudumbai

(Thumbnail shows a flask, which commonly holds chemicals. Image by Fotohunter.)