Chemical Execs Struggle to Assess Tariff Impacts
Firms adjust supply chains to mitigate costs, but they worry about demand impact
Amid a period of uncertainty that one executive calls a “fog,” chemical companies are doing damage assessment and honing their strategies to respond to the trade war that erupted a month ago.
On April 2, the Donald J. Trump administration imposed a 10% duty on all major trading partners. More alarming for companies of all types, it also imposed 145% tariffs on goods from China, prompting that country to slap retaliatory tariffs on US products.
One relief is that many chemicals, including polymers like polyethylene and petrochemicals such as phenol, are exempt from the new tariffs. Meanwhile, the Chinese government is said to be preparing a list of about 130 products from the US that it will exempt from its own tariffs. Those items may include ethane and certain grades of polyethylene.
In recent conference calls with stock analysts to discuss first-quarter financial results, chemical executives were frank in describing their inability to make forecasts in the current economic environment. “I'm not sure if we can tell you what's going to be happening between now and the end of the week in either the macroeconomy or our own petrochemical industry,” Huntsman CEO Peter Huntsman told analysts on a May 2 call.
Huntsman said he doesn’t expect double-digit declines in the output of chemical-intensive products like motor vehicles and aircraft. “However, I am seeing in the past few weeks suppliers panic and—in a world of great and changing uncertainties—lowering inventories, preserving working capital, and stopping supply chains,” he added. “I would see a scenario not unlike 2020, when supply chains and inventories froze, and the world stood in a state of paralysis as consumers, manufacturers, and suppliers tried to make sense of the short term.”
There has already been a precipitous drop in Chinese exports into the Americas of the polyurethane raw material methylene diphenyl diisocyanate, Huntsman said. The region received only 1,000 metric tons (t) of material from China during the first week of April. In 2024, it got about 6,000 t per week from the country.
Speaking to analysts on Eastman Chemical’s call, CEO Mark Costa noted a recent spike in demand for durable products such as cars and blenders, but he worries that the jump reflects purchases intended to beat the impact of tariffs. “The consumer data would lead you to believe that there's a certain amount of growth going on. But in some sense, what you're doing is you're pulling forward consumer demand from the second half into now,” he told analysts. “That's creating a lot of fog in what's really going on.”
Eastman generates about 11% of its sales, or about $1.1 billion a year, from China. The company estimates that it will take a hit to its second quarter 2025 earnings of $30 million because of the tariffs.
In her call, DuPont CEO Lori Koch estimated a tariff-related impact of $60 million to its earnings, mostly during the second half of the year. This will be after mitigation strategies such as imposing product surcharges and adjusting the company’s supply chain to avoid tariffs from shipments directly to and from China. Without these interventions, Koch said, tariffs would cost the company $500 million. Officials expect that the benefits from tariff exemptions will be smaller than DuPont’s own mitigation steps.
“Our scale provides ample flexibility to adjust production and product flow, enabling us to mitigate trade risks,” Koch said. “Additionally, from a sourcing perspective, the vast majority of our raw material buy is purchased in the region it is consumed and is not subject to the new tariffs.”
Similarly, LyondellBasell Industries CEO Peter Vanacker foresees little direct impact from the tariffs. “The company's global supply network is mainly positioned to serve local demands for our polyethylene and polypropylene polymers,” he told analysts. “Approximately 75% is sold in local markets.”