While the impact of new US tariffs on the international chemicals industry remains uncertain, there have been calls for renewed negotiations to reduce the impact of this major change in trade policy from the US.
The White House has has announced plans to apply at least a 10% tariff on goods imported into the country - with the tariffs for imports from some countries due to be significantly higher. However, after the tariffs were announced, the White House has since paused the implementation of the tariffs on all countries for 90 days, with the exception of China, where tariffs now stand at 145% for many goods following a series of escalations. China has imposed its own 125% tariffs on imports from the US.
In the initial announcement of the tariffs, the US did list some exclusions, including copper, pharmaceuticals, semiconductors, certain critical minerals, and energy and energy products. The White House has published a list of chemicals and materials currently excluded from the tariffs which may lessen the impact on international exporters of chemicals to an extent. However, the US administration has suggested that tariffs on imports of pharmaceuticals are likely to follow.
The US Society of Chemical Manufacturers & Affiliates said specialty chemical manufacturers in the US face deep uncertainty and are "now confronting significantly higher costs for the raw materials they rely on—inputs often unavailable at scale within the US. These sudden shifts are occurring in the context of complex, global supply chains and long-standing customer commitments," it said.
It's far from clear how the US tariffs - if they stay in place longer term - will impact on international trade; tariffs that raise the cost of importing to the US from one country may create an opportunity for companies in another, but international flows of chemicals are significant and raising tariffs is likely to increase cost and complexity especially for smaller companies and could have unexpected consequences.
The stakes are certainly high: in 2023 the European Union exported €523 billion of chemicals and related products while importing €325 billion. The US was the largest importer at €340 billion and second largest exporter at €279 billion, while China was the third largest importer (€218 billion) and exporter (€240 billion) according to UN trade data.
EU countries will see a 20% tariff on exports to the US. Calling for ‘cool heads’ the German Chemicals Industries Association VCI said "We regret the decision of the US government. Now it is important for everyone involved to keep a cool head. The USA is a key economic partner for Germany and will remain so. An escalation spiral would only increase the damage. Our country must not become the plaything of an escalating trade war. Brussels must remain in close dialogue with Washington. Berlin must help ensure that Brussels speaks with one voice for the EU. Europe needs a strong mandate, also in the interest of German industry. The goal must be a mutually fair solution – for Europe and the USA." Spanish chemicals industry trade body Feique warned that tariffs could stop any growth in the sector this year.
In terms of the UK, according to UK government figures, chemicals were the second largest commodity exported from the UK to the US in 2023, with the £14.2bn of chemical exports to the US accounting for almost a quarter (23.6%) of the UK's total chemical exports. This included £8.8bn of medicinal and pharmaceutical products, while there were £2.8bn of organic chemicals exported.
With the UK being hit by a 10% reciprocal tariff on its exports, the UK Government’s Business and Trade Secretary, Jonathan Reynolds expressed disappointment noting: “We are, of course, disappointed by the increase in tariffs on the UK, and on other countries around the world. The impact will be felt amongst all trading nations.”
Manufacturers association Make said the tariffs were likely to damage the integrated supply chains connecting the UK with US through other trading partners such as the EU, Canada and Mexico, and said the UK government needs to work to negotiate a new mutually beneficial economic agreement with the US to reverse this "highly damaging development".
"UK manufacturing is already under significant pressure coping with huge rises in costs, uncompetitive energy prices and a skills crisis, adding this additional challenge will be very damaging for the sector and result in the loss of jobs," it said.
Describing the US move as a ‘turning point’ for global trade, Barret Kupelian, Chief Economist at PwC UK said: “For the UK the impact is significant, though less severe than for some other countries. We export around £60 billion in goods to the US, including pharmaceuticals, cars, and high-tech equipment. Not all sectors will be hit equally; car exports will face higher tariffs.”
Kupelian also highlighted the impact across the UK’s regions. “Manufacturing-heavy areas like the West Midlands and East of England are especially exposed. And because many goods are sold as part of bundled packages, some UK services could also be caught in the crossfire.”
“One sliver lining,” Kupelian noted “is that the retaliatory tariff rate applied at the UK is the lowest among the affected countries. Our European trading partners will face steeper tariffs, though some of that economic pain will inevitably spill over to UK firms through supply chains and shared markets.”
Looking at the impact on the UK’s chemical sector the Chemical Industries Association said that the tariffs were "another blow to our industry and to our manufacturing-wide customer base".
“On top of paying energy bills which are 400% higher than those in the US, and 100% more than in Europe, these additional costs will mean companies looking again at their UK future,” said Steve Elliot CEO of the association, which said the UK exported £11 billion worth of chemicals and pharmaceutical goods to the US, based on 2024 data.
"Whilst the government is right to think before pressing the retaliation button and we welcome the commitment to consult on the implications of possible retaliatory measures, talks between our respective administrations must proceed as quickly as possible," he said.
Further reading:
• UK and Canada negotiate modernised trade deal
• New Dawn for Trade Deals
• UK-India agreement seeks to double trade by 2030
Get the more science and innovation news every month in Chemistry & Industry magazine. You can subscribe to C&I here.
Visit Blog