The International Monetary Fund’s (IMF) April 2025 World Economic Outlook (WEO) provides a sobering view of the global economy, projecting a slowdown in global growth from 3.3% in 2024 to 2.8% in 2025. This deceleration, compounded by rising trade tensions and inflationary pressures, carries substantial implications for sectors deeply integrated with global supply chains, among them, the polyurethane (PU) industry.
Yet amid these headwinds, the report also highlights important areas of resilience and opportunity, offering a roadmap for adaptive and forward-looking sectors like polyurethane to not only weather the storm but emerge stronger.
Economic Slowdown and Trade Turbulence
The polyurethane industry, a key supplier to the automotive, construction, and consumer goods sectors, finds itself navigating an increasingly volatile macroeconomic environment. According to the WEO, advanced economies are expected to grow by only 1.4% in 2025, down from 1.8% in 2024, while emerging market and developing economies will see growth slow from 4.3% to 3.7%.
Growth in world trade volume is forecast to decline significantly, from 3.8% in 2024 to 1.7% in 2025, largely due to tariffs and supply chain disruptions. For the polyurethane industry, which relies on the seamless movement of both raw materials (e.g., polyols, isocyanates) and finished goods, this trade deceleration threatens to constrain production capacity and inflate input costs.
However, the IMF notes that global output is now close to potential, and labour markets have normalized across many economies. This resilience suggests that no deep global recession is anticipated, offering a degree of stability for downstream polyurethane demand in consumer and industrial markets.
Tariffs and Trade Policy Uncertainty
The report details a sharp escalation in trade tensions in April 2025, particularly between the U.S., China, and Canada. A 25% U.S. tariff on automobiles and auto parts took effect, alongside broader 10–50% tariffs on imports from over 60 countries. On April 2, the U.S. imposed a 10% minimum tariff on all imports (excluding Canada and Mexico), later raising tariffs on Chinese goods further. China responded with increased duties, reaching a 125% tariff rate on U.S. goods by mid-April, while the U.S. rate on Chinese imports hit 145%. The EU imposed 25% retaliatory tariffs, paused for 90 days, as did some U.S. measures. Certain electronics, including smartphones and laptops, were exempted from the tariffs on April 11. By April 14, the U.S. global average tariff rate had surged from under 3% in January to around 25%.
This wave of protectionism has disrupted global supply chains, raising costs for polyurethane producers reliant on cross-border flows of materials and components. Yet, while trade volatility poses immediate challenges, the IMF notes that this disruption is accelerating a broader shift toward supply chain diversification, opening new opportunities in Southeast Asia, Latin America, and Central Europe, where firms are repositioning to avoid tariffs and build regional resilience.
Regional Shifts: Asia-Pacific’s Strategic Role
Despite global headwinds, Asia-Pacific remains a relative bright spot. Emerging and developing Asia is projected to grow by 4.5% in 2025, led by ASEAN nations. This region continues to play a pivotal role in global polyurethane demand, with rapid urbanization and industrial development driving growth in PU-based insulation and coatings.
China’s 2025 growth forecast has been revised to 4.0%, reflecting trade-related slowdowns and real estate fragility. However, a stronger-than-expected Q4 in 2024 and expansionary fiscal policy offer some offsetting momentum. India, meanwhile, continues to surge, with projected growth of 6.2% in 2025, reinforcing its position as an emerging engine of demand for PU in infrastructure, transport, and consumer goods.
Cost Pressures and Commodity Volatility
Raw material input costs remain a concern. Oil prices are forecast to decline by 15.5%, offering potential relief on petrochemical feedstocks such as polyether polyols and MDI. This could improve margins or allow more competitive pricing in downstream applications.
Natural gas, however, is projected to rise 22.8%—a factor that could raise processing costs, particularly in regions reliant on gas-based energy. Still, oil price softness may provide a net benefit for PU producers depending on their feedstock mix and regional energy sourcing.
While cost volatility presents near-term challenges, regulatory and environmental shifts are also reshaping the industry’s long-term trajectory, pushing polyurethane toward sustainable innovation.
Structural Adaptation: Toward Sustainability
Environmental regulation continues to mount. The EU and U.S. are enforcing stricter limits on isocyanate exposure, pushing the industry toward bio-based and low-VOC alternatives. Although still a niche market, the broader economic context reinforces the need for structural innovation.
The IMF highlights green transition as a medium-term imperative, with rising investment in energy efficiency and circular economy models. For polyurethane, this means significant opportunities in:
• Bio-based PU from renewable feedstocks
• Recyclable or re-processable thermoplastic polyurethanes
• Energy-saving insulation materials aligned with green building codes
Opportunities Amid Stabilization
Importantly, the WEO indicates that inflation expectations are stabilizing and that central banks in major economies are expected to ease interest rates in 2025. For polyurethane, which is closely tied to construction, manufacturing, and automotive lending, this could rejuvenate demand:
• Lower mortgage and loan rates may support construction and housing starts, increasing demand for PU-based insulation and sealants.
• Easing credit conditions could boost auto sales and consumer durables, both key PU-consuming sectors.
Additionally, the IMF points to fiscal expansion in key economies, such as Germany, that may benefit infrastructure and green construction areas where polyurethane is already a core material.
Conclusion
The IMF’s 2025 WEO makes clear that uncertainty is the new normal. For the polyurethane industry, resilience will depend on agility, diversifying supply chains, embracing sustainable materials, and responding quickly to shifting regional dynamics.
Yet beneath the turbulence lie tangible opportunities, a stabilizing global economy, energy price corrections, sustained demand in Asia, and a global shift toward sustainability and innovation. From macroeconomic stabilization to regulatory trends and green investment, the polyurethane sector is well-positioned to seize these openings, so long as it continues to adapt, invest, and align with emerging global trends.
Data source:
International Monetary Fund. World Economic Outlook, April 2025 – Chapter 1: Global Prospects and Policies.
