The Trump Tariffs
China’s chemical industry is diversifying markets, boosting innovation, and strengthening supply chains to counter US tariffs and maintain export resilience.
Author: Kai Pflug, CEO, Management Consulting – Chemicals, Shanghai, China
Reactions by the Chinese Chemical Industry
While US President Trump’s recent tariff policy has been wildly unpredictable, it seems clear that high tariffs on imports from China are a core element. At the time of writing this, they stand at 145% and thus are a massive obstacle to exporting chemicals from China to the US. How is China’s chemical industry respond to this?
The initial reaction has mostly been defiant, mirroring the reaction of the Central Government. Specifically, there are three types of statements coming from Chinese chemical companies and the Chinese media:
1. “It will mainly hurt the US”
Chinese news media points out that the US is one of the world’s largest importers of laboratory equipment and reagents. Thus, it is claimed that the new round of tariff policies will lead to a sharp increase in the prices of US scientific research equipment and supplies, once again causing a serious impact on US scientific research.
2. “It does not matter much”
For example, ChemChina stated that the company’s overseas business covers more than 80 countries and regions around the world, mainly along the “Belt and Road” countries. According to ChemChina, the US tariff adjustment has little impact on the company, and the company’s overseas business has not been affected at present.
3. “It will hurt a bit, but there will also be benefits”
For example, Satellite Chemical states that the 34% tariffs on ethylene imports to China will increase costs by 3-5%, but that the reduction in imports will lead to a domestic supply gap, and product prices will rise, offsetting the impact of the tariffs.
A financial analyst states that while the US tax increase has a negative impact on chemical products, China’s countermeasures may bring considerable benefits to some chemical products by increasing domestic price levels. Some products may also be produced by different production methods than currently due to the changed raw materials costs, which may benefit technologies such as MTO (methanol-to-olefin).
My personal judgement is that these statements are too optimistic and reflect more a combination of wishful thinking and the desire to support the government’s stance. Given the current weak state of China’s economy, the tariffs and retaliatory tariffs will cause some pain. On the other hand, exports to the US account for only about 10% of China’s chemical exports and about 1% of China’s total chemical sales. In addition, the country has made great progress in establishing its domestic chemical value chains. So, I do not expect the tariffs to be catastrophic for the Chinese chemical industry.
Kai Pflug
Management Consulting – Chemicals, Shanghai, China
© Management Consulting – Chemicals
