Asia petrochemicals slump as US-China trade war stokes recession fears

SINGAPORE (ICIS)–US “reciprocal” tariffs are prompting a shift of trade flows and supply chains as market players in Asia seek alternative export outlets for some chemicals, while overall demand remains tepid amid growing fears of a global recession.

• US-China trade war 2.0 keeps market players on edge
• Regional traders wary amid US’ 90-day tariff suspension
• SE Asia prepares for US trade talks as China president visits Vietnam, Malaysia, Cambodia

Trades across the equities and commodities markets last week have been highly volatile since the start of April in the wake of US President Donald Trump’s reciprocal tariffs, the highest of which was imposed on China.

The higher-than-expected tariffs sparked concerns over a possible global recession that sent crude prices slumping last week, dragging down downstream aromatics products such as benzene and toluene.

Trump had raised the reciprocal tariffs for China three times in as many days – from 34%, to 84% and to 125% on 9-11 April – with China responding in kind.

Including the combined 20% tariffs imposed in the past two months, the US’ effective additional tariffs for China stand at 145%.

In the polyethylene (PE) market, prices are softening as US-bound export orders shrink, while polypropylene (PP) exports from China to southeast Asia look set to decline.

Most polyolefin players in Asia and beyond are currently attending the 37th International Exhibition on Plastics and Rubber Industries (Chinaplas) in Shenzhen, China, which will run up to 18 April.

Some China-based market players said the event could provide them an opportunity to explore alternative markets by deepening their relationships with buyers in southeast Asia.

Exports of chemicals and plastics used in automobiles to the US, meanwhile, are likely to shrink as well amid auto tariffs from the world’s biggest economy.

Apart from PP, exports nylon, butadiene (BD), and styrene butadiene rubber (SBR) to the US are expected to decline.

Trump, on 14 April, said he is considering possible exemptions to his 25% tariffs on imported automobiles and parts. His tariffs on all car imports took effect on 3 April, while those on automotive parts will take place no later than 3 May.

The automotive sector is a major downstream industry for petrochemicals.

China’s PE imports from the US spiked in early 2025 but this is expected to reverse sharply because of the trade war between the two countries.

However, China has a substantial number of naphtha and coal-based PE plants starting up in 2025 with a combined PE capacity of more than 8 million tonnes, which should reduce the country’s dependence on imports.

The US will also need to redirect surplus PE to alternative markets amid dwindling Chinese demand.

Market players expect demand in the second quarter to be worse than the first three months of 2025 amid hefty US reciprocal tariffs hanging over countries in Asia when Trump’s three-month pause lapses.

Implementation of the US’ reciprocal tariffs were suspended on 9 April, for 90 days, providing some reprieve to about 60 countries, except China.

Freight rates between China and the US have already decreased due to the trade war as demand evaporates.

However, vinyl acetate monomer (VAM) prices in India are bucking the general downtrend and have firmed up as the chemical is not directly subjected to US tariffs.

VAM is primarily used in the production of adhesives, textiles, paints and coatings.

SE ASIA PREPARE TRADE TALKS
The 10-member ASEAN group pledged that they will not impose retaliatory tariffs on the US following an emergency meeting, opting to negotiate with the US.

Among the nations scheduled for talks with the US are Vietnam, Thailand and Indonesia – all of which were slapped with high tariffs of up to 46%.

Thailand intends to scrutinize imports more thoroughly to prevent cheap imports from China entering the country, as the US has warned against such “third-country” methods of evading tariffs.

Anti-dumping duties are also being considered by Malaysia and Indonesia against China to counter an expected rise in cheap imports to their countries.

Trade flows are still expected to change as China steps up talks and partnerships with the EU, as well as with southeast Asian countries such as Malaysia, Vietnam and Cambodia.

While several Asian nations are lining up for discussions with the US government, China and the US have yet to schedule a meeting, heightening concerns of economic headwinds in the coming year.

Singapore has revised down its GDP growth forecast for 2025 to between 0-2% on account of the US-China trade war, and other countries are expected to follow suit.

Before the pause on reciprocal tariffs, the World Trade Organization (WTO) had forecast trade growth to contract by 1.0% in 2025, from 3.0% previously.

Meanwhile, China President Xi Jinping is currently in southeast Asia – with state visits to Vietnam, Malaysia and Cambodia – up to 18 April, to forge stronger economic ties with its Asian neighbors amid an escalating trade war with the US.

China posted an annualized Q1 GDP growth of 5.4%, unchanged form the previous quarter, while there is a consensus that the Asian economic giant would weaken from Q2 onward.

Focus article by Jonathan Yee

Visit the ICIS Topic Page: US tariffs, policy – impact on chemicals and energy.

Additional reporting by Samuel Wong, Izham Ahamd, Jackie Wong, Hwee Hwee Tan, Joanne Wang, Lucy Shuai, Jonathan Chou, Angeline Soh, Melanie Wee, Shannen Ng and Josh Quah