Trump tariff threat reels chemical industry

Threats of steep US tariffs on goods from Canada, Mexico, and China have exposed the vulnerability of the chemical, plastics, and pharmaceutical industries to a trade war that would most likely disrupt supply chains and raise prices.

On Feb 1., to pressure the countries to stem fentanyl smuggling into the US, President Donald J. Trump ordered 25% tariffs on imports of all products from free-trade partners Canada and Mexico, with the exception of energy products from Canada, which would have a 10% rate. The new tariffs were set to go into effect Feb. 4.

The administration also scheduled 10% tariffs on China, on top of sometimes-hefty existing duties on imports from the country. For example, the Biden administration last year imposed duties of 100% and 50%, respectively, on electric vehicles and on solar cells and semiconductors from China.

Canada and Mexico promised retaliatory tariffs on US goods.

But on Feb. 3, Trump ordered a monthlong freeze on the Mexico and Canada tariffs after those countries agreed to step up border security measures. The administration made no such agreement with China, however. Instead, China is imposing retaliatory tariffs on US products such as coal, liquefied natural gas, and petroleum.

Mexico, Canada, and China are the three largest US trading partners, and the US maintains a trade surplus in chemicals with all three. It exported $37.5 billion worth of chemicals to Canada in 2023, for a trade surplus of $6.8 billion. Mexico received $31.2 billion in chemical exports from the US that year, about $22.7 billion more than it exported to the US. China imported $26.2 billion worth of chemicals, giving the US a $5.2 billion surplus.

The Society of Chemical Manufacturers and Affiliates (SOCMA), a trade group that represents US specialty chemical producers, says in a statement that the proposed tariffs represent “a significant shift in U.S. trade policy” and would disrupt supply chains and raise operating costs for manufacturers. “A targeted, strategic approach is essential to addressing trade challenges without undermining the supply chains that specialty chemical manufacturers depend on,” says SOCMA president Jennifer Abril.

Individual chemical makers are also weighing in on the proposed tariffs. The Canadian fertilizer maker Nutrien, which exports potash to the US, says in an email to C&EN that “whether it’s the products that go into producing a crop or the crops themselves, the agriculture industry requires free trade and accessible markets.

The company later added that “Nutrien is currently assessing prices considering the recent announcement of US tariffs and we intend to pass through the tariff costs to customers.”

Plastics makers are also on alert. Matt Seaholm, president of the Plastics Industry Association, says in a statement that “a blanket tariff policy could have significant economic consequences, disrupting the movement of essential machines, products, and materials that keep American manufacturers running.”

The plastics industry is a bright spot for the US economy, Seaholm says, generating a nearly $1 billion trade surplus on more than $74 billion in exports. “However, new tariffs on key trading partners threaten supply chains, increase costs, and risk eroding this advantage,” he adds.

Some officials in the pharmaceutical industry are concerned that tariffs will exacerbate shortages and drive up costs. “Generic manufacturers simply can’t absorb new costs. Our manufacturers sell at an extremely low price, sometimes at a loss, and are increasingly forced to exit markets where they are underwater,” John Murphy III, president of the Association for Accessible Medicines, says in a statement. “The overall value of all generic sales in the U.S. has gone down by $6.4 billion in five years despite growth in volume and new generic launches. Tariffs would make this much worse.”

The Healthcare Distribution Alliance is calling on the Trump administration to carve out exemptions and long implementation timelines for pharmaceutical products to prevent supply disruptions.