Trade policy vacillations and a lack of clarity on end-use demand have taken a toll on the outlook for the US chemical industry, according to the American Chemistry Council (ACC). US chemicals output, excluding pharmaceuticals, is expected to increase by just 0.3% this year, with an 0.2% contraction forecast for 2026, said Chemweek.
ACC expects US GDP to rise by 1.3% in 2025, down significantly from a 2.7% growth forecast at the start of the year.
The soft full-year forecast for chemicals outlook indicates weakness over the remainder of the year, as output 6% sequentially in the first quarter. “Expectations over the next six months have deteriorated,” ACC said. “As uncertainty has clouded the outlook for many chemistry-consuming end-use markets, chemical demand is expected to weaken as well.”
A lack of clarity is reducing confidence among ACC members, ACC president and CEO Chris Jahn told CW. “What I hear from members is that they’d like to see sustainable demand growth going forward,” Jahn said. “There is some talk of certain segments seeing additional activity, but you can’t be confident that we are really getting back to growth versus seeing…pre-buying due to tariffs.”
While tariff pre-buying has not been evident in inventory numbers, it may still be early for such indicators to show up in the data, ACC chief economist Martha Moore told CW. “Some inventory to sales numbers are ticking up, but it’s not a steep increase,” she said. Still, “we’re keeping an eye on it,” she added.
Trade policy has been the primary factor driving a deterioration in the outlook so far in 2025. Uncertainty “is pervasive throughout the economy,” Moore said.
US consumer spending and business investment are both expected to downshift this year, according to ACC’s forecast. Consumer spending is forecast to post 1.9% growth in 2025, compared with 2.8% growth in 2024. Business investment is expected to post 1.7% growth in 2025, compared with 4.0% growth last year.
Growth in global industrial production is also expected to fall this year, albeit narrowly, from 1.7% growth in 2024 to 1.5%, according to ACC.
The downshift in expectations comes after some optimism in late 2024 and early 2025. The past few years “were weak for manufacturing…then we saw some green shoots” late last year and early this year, Moore said. Around the start of the year, “things were on an upward trajectory…but that of course has shifted,” she added. “Policy uncertainty is the biggest factor.”
“Pervasive uncertainty about trade policy and its potential impact has slowed economic activity in the US and abroad,” ACC said in its mid-year report. “The lack of clarity makes it difficult for firms to make decisions, and as a result, orders, investment and hiring have been delayed as many firms adopt a ‘wait and see’ position.”
Uncertainty around trade policy is not the only factor putting a damper on demand, however. High interest rates, and material and labor costs – as well as tariffs – have cut into affordability in the key housing and automotive end markets. “Affordability is an issue” in both sectors, Moore said. ACC expects both light vehicle sales and housing starts to decline year-over-year in the US in 2025.
Some end markets are performing relatively well. The semiconductor sector is expected to see 7.0% growth in production volumes this year, ACC said, driven mainly by demand from AI applications. Computers, oil and gas, and pharmaceuticals are also expected to see above-trend growth, according to ACC.
Still, there is a sense of hesitation. At ACC’s annual meeting in Colorado Springs, Colorado earlier this month, there was “anxiousness about the short-term economic outlook,” Jahn said. ACC has downgraded its full-year growth forecasts for most of the chemical end markets it tracks, with about half of those markets expected to see volumes contract this year.
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