A new wave of US trade tariffs announced by President Donald Trump on April 2 is expected to have a significant impact on Asian chemical markets, export-oriented countries and the export of finished goods, sources said April 3, as per Chemweek.
Trump announced a minimum 10% reciprocal tariff on imports from all countries starting April 5. Despite crude and refined products being exempt from the measures, the potential impact of escalating trade tensions is expected to significantly dampen oil demand growth expectations for 2025.
Asian countries face tariffs ranging from 20% up to as high as 46% in the case of Vietnam, although some chemicals like benzene, toluene, xylenes and olefins are expected to be exempted.
“A 36%-46% tariff on goods from Thailand and Vietnam is massive. Thailand’s economy is already shrinking for a bunch of reasons, and this new tariff is just adding fuel to the fire. It’s a nightmare for Thai exporters and for foreign companies that use Thailand as a manufacturing base,” said a Thailand-based trader.
“My customers in wood, packaging, coating are all crying,” said a Vietnamese importer, who added that she “expects a severe impact on the market demand and movement.”
Vietnam was among the worst-hit countries in the new round of US tariff announcements, with a reciprocal tariff as high as 46%.
Other large chemicals producers and exporters such as South Korea have been hit by 26% tariffs and Japan by 24%.
Exemptions likely for several chemicals
South Korea’s key chemical exports to the US in recent years have been benzene, mixed xylene and toluene, but according to Annex 2 of President Donald Trump’s new executive order, these are exempt from the new tariffs.
“Xylene is exempt from the US reciprocal tariffs, but downstream products are affected, which will still have an impact on upstream products,” said a Northeast Asian petrochemical producer.
Sources in the benzene market agreed, as it is a key precursor for styrene — as well as synthetic fibers and solvents — essential for producing acrylonitrile-butadiene-styrene used in home electronics.
“With finished products such as home appliances primarily targeting the European and American markets, any impact on exports of finished products will affect the demand for upstream benzene,” a producer said.
China’s home electronics exports surged to Yuan 712.2 billion in 2024, accounting for 46% of production. This reflects a 15.4% increase from the previous year, which underscores the critical nature of this market amid evolving trade dynamics.
“If South Korea-origin benzene is exempt from the tariffs, the impact may be delayed, compared to a blanket tariff could drastically shift trade flows,” another source noted.
Several large Asian chemical-producing countries have been hit with the new tariffs, including India at 27%, Taiwan, 32%, and Indonesia, 32%, which will come into effect April 9.
The impact of the tariffs on Asian polypropylene and other C3 downstream markets would lead to a decline in demand, sources expected. Even worse would be the yuan weakening versus the dollar, which could make feedstock imports even less attractive for China, sources added.
The new tariffs rattled market participants in the Asian polyester chain, including para-xylene and purified terephthalic acid producers and traders.
The polyester market has turned sour since the tariffs were announced, as they could impact product exports, sources said. “Polyester export demand will decrease,” a trader in China said.
“I believe this will significantly suppress the demand for polyester,” a second China-based trader said.
Both traders said China’s domestic demand remains stubbornly weak and the polyester markets bank heavily on export-driven dynamics.
“The impact for chemicals is indirect ... tariffs are usually negative on demand and that would weigh in on the prices,” a Singapore-based trader said.
“Most chemicals end up in consumer products, stuff that China exports and the effective tariff from China now is over 50%,” he said. “For sure will hit everyone/everything.”
Global oil prices futures traded 3% lower early April 3 after sharply declining following President Trump’s announcement of reciprocal tariffs on imports sparked concerns over global oil demand growth and retaliatory tariffs.
S&P Global Market Intelligence analysis suggests that, in a pessimistic scenario involving trade wars and other adverse factors, global oil demand growth could be cut by about 40% to 750,000 b/d in 2025. “In the pessimistic case, global oil demand is estimated to be lower in absolute terms to 105.7 million b/d in 2025 compared to the base case of 106.2 million b/d,” S&P Global Commodity Insights oil analysts said in a note.
European Commission chief Ursula von der Leyen warned that the US tariffs are a “major blow to the world economy.” Von der Leyen warned that the EU — which will be subject to a 20% tariff — is preparing countermeasures in case negotiations fail.
China called on the US to “immediately cancel” the tariffs, adding that it would “take countermeasures to safeguard its own rights and interests.”
UK Prime Minister Keir Starmer said the government would respond with “cool and calm heads” and reiterated that he would “fight” to secure a trade deal with the US.
mrchub.com
en