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Polyethylene and Polypropylene Face Challenging New Tariff Program
04/08/2025
As the full ramifications of the US implementing its sweeping new tariff program begin to materialize, recent developments are creating fresh pressure on the global plastics supply chain for both Polyethylene (PE) and Polypropylene (PP) markets that are grappling with shifting trade dynamics.
The US has already announced significant retaliatory tariffs, ranging from 10% to nearly 50% on US imports from every country. The goal of the tariffs seem to be three-fold: generating revenue for the US government as a means towards balancing the federal budget, protectionist support for US manufacturers to boost reshoring and stimulate domestic growth, and to pressure other countries to drop their existing tariffs on US products, which would level the playing field and help US companies export more goods to the international community.
The response from other countries have ranged from offers to drop tariffs against US goods to over the top retaliatory tariffs escalating trade and geopolitical tensions. An agreement has already been made with Mexico and Canada to mutually halt the tariffs for all products under USMCA, which includes Polyethylene and Polypropylene resins. The response from the investor community has been a massive sell-off in the worldâs equity and commodity markets.
Today the US upped the ante as White House Press Secretary Karoline Leavitt announced 104% tariffs on Chinese imports with implementation starting tomorrow, Wednesday April 9, 2025. âCountries like China, who have chosen to retaliate and try to double down on their mistreatment of American workers, are making a mistake,â Leavitt told reporters on Tuesday. âPresident Trump has a spine of steel, and he will not break.â
Chinaâs National Tariff Commission announced on April 5 that it will impose a 20% duty on all High-Density Polyethylene (HDPE) imports from the US beginning May 1, citing âunfair trade practices.â The move follows similar announcements by India and Indonesia targeting Linear Low-Density PE (LLDPE) grades with fresh levies ranging from 12% to 18%.
In response, major US PE producers are reportedly reviewing production targets for the balance of 2025. Our view is that domestic operating rates could fall well below 80% in coming months unless export routes reopen or massively stronger domestic demand materializes.
The EU quickly responded with 25% tariffs including US PE and PP resins; however, this might not be in their own best interest and exclusions are already being sought as multiple old and inefficient European resin reactors have been idled recently amid unfavorable feedstock costs. The growing trend has been for European PE producers with US reactor assets to make lower-cost resin in the US and ship it back overseas for local sales and distribution while reducing European production.
On April 6, US Customs and Border Protection issued a directive aimed at clamping down on what officials are calling âtariff circumvention via transshipment.â The agency will begin enhanced scrutiny of imports, polymers and (semi) finished goods included, that are routed through third-party nations particularly from Southeast Asia which is suspected of relabeling Chinese or otherwise tariff-burdened resins as originating in lower-tariff countries.
Resin distribution participants confirm the audits and origin verification probes have already begun at key ports including Long Beach, Houston, and Savannah. The enforcement push isnât specifically correlated to large volumes of Chinese PE or PP resin sent to the US but rather finished goods and plastic components manufactured in China or elsewhere in neighboring Southeast Asian countries. With reciprocal tariffs on certain Chinese polymer-based products set to rise from 34% to a staggering 104% tomorrow, this heightened enforcement could create short-term disruptions, especially in sectors relying on molded parts, films, or packaging imported from Asia.
While it can get very messy along the way, domestic resin processors ultimately stand to gain from a pending surge in local demand for US made products, and with alternative tariff-adjusted imports priced relatively high. Many US resin processors which have excess or idled capacity are now well positioned to ramp up production and quickly fill orders that may shift away from China. This could be a boon for film extruders as imports of freight efficient rollstock from China and Asia in general would be significantly curtailed. The reshoring of manufacturing could accelerate with new investment in equipment and facilities over the mid-term, especially if import economics continue to worsen.
However, foreign processors will also look to renegotiate pricing and terms in an attempt to retain business rather than walk away from the valuable US consumer market. But the reality is more nuanced, as not every PE and PP pellet or part currently flowing into the US will be cut off. Smaller margins may be absorbed at various levels of the supply chain with incremental costs eventually passed on to the consumer.
For example, it is not necessarily quick and easy to swap specâd in resin or parts, so foreign polymer or parts suppliers may lower their pricing somewhat, while the assembler and end manufacturer also accept thinner profit margins, resulting in a modest rise in consumer prices rather than any one player absorbing the full impact. In these cases, the burden is likely to be distributed broadly across the supply chain down through the consumer.
It is feasible that tariffs could support Polypropylene prices in the mid-term as the US is generally a small net importer of PP resin from high tariffed countries, while exports are mostly sent to protected Canadian and Mexican markets and US producers have not relied on exports as a meaningful outlet for material. Meanwhile, PP market prices are currently trending lower from falling Propylene costs as abundant caution has led to processor indecision reducing resin sales as well as monomer demand from PP producers as they try to keep the market balanced. As such, PP inventories throughout the supply chain have been drawn down deeply and the market could benefit from an eventual restocking effort.
The Polyethylene market faces greater headwinds from both international and domestic angles as US producers are heavily reliant on exports, which reached a record 52% of total US PE sales. A substantial portion ships to Asia, Latin America and Europe, where retaliatory tariffs and slowing downstream demand are converging to create a potentially volatile environment. Ethylene monomer costs have quickly fallen more than 40% from the Mid-Feb high as PE producers throttle back operating rates due to the sharp drop in new export orders. Polyethylene capacity has grown around 75% in the past decade as producers built new plants to target export sales utilizing cost-advanted North American feedstocks. So idling substantial capacity in the face of falling export demand was not in the cards and is certainly not desirable.
Compounding the challenge for PE is the impact of the April 3 US auto tariff announcement, while automotive components are a major outlet for PP, Polyethylene is widely used in packaging, wire and cable jacketing, and protective films across vehicle supply chains. The 25% tariff now affects both cars and key components; production slowdowns in auto manufacturing could dampen PE usage from the sectorâs indirect applications. âPackaging demand for spare parts and protective wrappings in auto supply lines is an often overlooked but significant demand driver for PE,â noted a source at the Plastics Industry Association. âDisruptions there ripple all the way back to resin producers.â
A clear emerging trend is the acceleration toward regional supply models. US buyers, particularly in the flexible packaging and consumer goods sectors are increasingly looking to secure domestic or nearby sources of both PP and PE. Mexico based processors, long dependent on US resin, are reportedly reevaluating procurement strategies in light of growing uncertainty around USMCA exemptions and documentation hurdles. Domestic Mexican production is set to rise in the latter half of 2025, as Braskem Idesaâs ethane import terminal will allow feedstocks to be imported from the Gulf Coast and other regions. The reactor will finally be able to reach full operating rates after years of lacking feedstocks and at the same time provide Pemex with greater domestic ethane and ethylene supply to raise their production.
While the Trump administration maintains that its goal is to rebalance trade and encourage domestic manufacturing, the result may be a longer term restructuring of how and where polymers are produced and consumed. For now, Polyethylene faces export driven constraints, while Polypropylene is poised for a domestic resurgence provided producers can stay nimble and respond to evolving demand trends.
With compliance audits increasing, tariff retaliation spreading, and global demand patterns shifting, the plastics market is entering a new phase of complexity. Businesses along the PE and PP value chains will need to stay agile, adapt sourcing strategies, and prepare for continued volatility in a world where trade flows have become anything but predictable.
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