(Washington, D.C.) US President Donald Trump announced on February 1st the imposition of steep tariffs on imports from the nation's three largest trading partners: Canada, China, and Mexico. This move threatens potential disruption across global supply chains, especially in the chemicals industry.

Effective February 4, the executive order imposes a 25% tariff on imports from Canada and Mexico and a 10% tariff on imports from China. However, energy imports from Canada, including oil, natural gas, electricity, coal, uranium, and critical minerals, are exempted from the higher tariffs and will incur a lower rate of 10%. In response, Canada, China, and Mexico have stated their intention to implement countermeasures.

On the morning of February 3, following a phone call with Mexican President Claudia Sheinbaum, President Trump agreed to put the tariffs on hold for one month. Later that day, after a conversation with Canadian Prime Minister Justin Trudeau, Trump also agreed to pause the tariffs on Canada for at least 30 days.

The US enjoys a strong positive trade balance in chemicals, benefiting from a low-cost global supply advantage, with a surplus of $30 billion in 2023, according to trade data analysis by the American Chemistry Council (ACC). More than half of US chemical exports are petrochemicals and derivatives, including plastic resins, according to the ACC.

The ACC stated that it “would ask that all parties negotiate a solution to the issues behind these Orders as soon as possible,” and emphasized its continued support for the USMCA Agreement between the United States, Canada, and Mexico.

In 2023, exports accounted for 26% of US chemical shipments, while imports made up 22% of apparent US production, according to the ACC. The US maintained a trade surplus of $25.3 billion with Canada and Mexico and $2.2 billion with China.

Canada, Mexico, and China are the top export partners for US chemicals, collectively accounting for $71.3 billion in chemical exports in 2023, or about 44% of the total, according to the ACC. Canada and Mexico each accounted for approximately 17.5%, while China accounted for 9%.

On the import side, the US sourced $24.2 billion in chemicals from Canada in 2023, making it the leading source of chemical imports, at 18% of the total. China ranked second with 9%, and Mexico accounted for 3% of US chemical imports, placing it sixth.

Much of the chemicals trade is intercompany sourcing, with the ACC estimating that 57% of chemical imports support companies with operations in the US.

The ACC has consistently advocated for the repeal of tariffs and a collective de-escalation of trade tensions, highlighting that “U.S.-imposed tariffs hurt the U.S. chemicals industry by cutting companies off from critical materials and inputs to manufacturing that may be unavailable or cost-prohibitive to produce domestically.

Source: American Chemistry Council (ACC)