President Donald Trump is frequently in the news of late. From immigration policy and geopolitical posturing to Elon Musk’s Department of Government Efficiency and the war against woke, rolling media keeps a steady flow of updates from the White House.
In the world of industry and manufacturing, the Trump Administration’s policies also remain a constant point of discussion as businesses everywhere examine the true impact on trade caused by tariffs on goods and raw materials imported to America. Nowhere is this more significant than for the chemicals and plastics sectors which rely so heavily on international cooperation and ease of trade. For while the global trade network has been here before, Trump 2.0 seems to be a sterner test of nerves for importers and exporters.
But what do experts in the chemical industry believe will be the largest impact and how will individual chemical traders, manufacturers, and their customers have to adjust?
The over-riding fear for many in the chemical sector is that tariffs will simply drive-up prices for end consumers. The alternative will be for companies to make strategic changes to their raw material sourcing or manufacturing location, which will also push up prices. As a recent report published in Plastics Today explains, “There is concern throughout the plastics industry that tariffs will slow production timelines as suppliers work through supply chain disruptions. In response, some companies are considering alternative sourcing strategies, including seeking domestic suppliers or diversifying their imports.”
With a long history of close cooperation, the Canadian and American chemical industries are intertwined. Chemical manufacturers in one region or country supply a chemical facility in another with the raw materials it needs, before it, in turn, can pass on a feedstock to the next chemical company in the supply chain.
“The chemistry sector is highly integrated in North America, and I would say the degree of that integration, frankly, is reflected in The United States-Mexico-Canada Agreement that was renewed in President Trump's first term,” notes Greg Moffatt, the recently appointed President of the Chemistry Industry Association of Canada. “The U.S. chemical industry posted a trade surplus of more than $30 billion in 2023. U.S. trade with Canada is very much in balance, if not completely in balance, so it’s highly concerning to us when tariffs come into play.”
One of the greatest concerns for Canadian chemical manufacturers is the possible threat that tariffs may pose to large chemical production facilities in Canada, such as Dow’s Path2Zero initiative. Projects such as these form the bedrock of industrial chemical supply to smaller suppliers and raw material traders.
“The reason why the relationship between the U.S. and Canada is so strong,” explains Moffat, “is we produce chlorine in British Columbia and Quebec, and it gets exported from British Columbia into the U.S. West — Washington, Oregon, California. From Quebec, it goes into the U.S. Northeast. And the reason why that takes place is because chlorine manufacturing in the U.S. is far away from those markets. And so, there are cost implications. You can't really pivot super quickly to construct a chlorine manufacturing facility to meet U.S. demand, so that's one specific example.”
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“In Canada, we're producing polyethylene, polypropylene rubbers, sulfuric acid, hydrochloric acid, hydrogen peroxide,” he adds. “There's just a broad spectrum of goods that are manufactured here, and they're sold into the U.S. market, and they're key contributors in the value chain. It would be very, very difficult, and it would take years for that capacity to be constructed.”
When tariffs are established, it impacts the output of these chemical plants but also puts in jeopardy plans for other chemical facilities which might be built in the future. Moreover, with chemical facilities taking years of planning and huge funding, supply chains cannot easily be restructured based on the four-year policy of a single administration.
For this reason the American Chemistry Council (ACC) has responded cautiously to the raising of barriers to trade, noting that Canada and Mexico are the US chemical industry’s largest trading partners.
"The American chemical industry imports materials, many of which are unavailable in the United States, adding value and supporting other manufacturing supply chains domestically and abroad, through our exports,” stated the ACC in its official response. Specifically identifying that the US chemicals sector is a net exporter to Canada and Mexico.
As the Trump Administration’s trade policies continue to shape the global chemical industry, companies and trade organizations remain on edge, balancing the risks and opportunities that come with shifting tariffs. While the USMCA agreement does provide a framework for cooperation, concerns over supply chain disruptions and long-term infrastructure planning remain top of mind for industry leaders.
The North American chemicals sector and its raw material suppliers and export partners will need to prepare for strategic adjustments and hopefully a clearer understanding of the evolving trade landscape if they are to survive the remaining years of Trump’s time in office.
Part 2 of this analysis will explore how other trade bodies and chemical companies are adapting to these challenges and how they envisage the chemical industry’s future.
Photo credit: Portcalls Asia on Unsplash, Standret on Freepik, tawatchai07, & Freepik
