Impact of Tariff Increases on the Polyether Polyol Market

Recent Tariff Policy Review

U.S. Tariffs on China:

On April 2, 2025, the U.S. government announced a 34% tariff on Chinese goods imported into the U.S.

On April 8, 2025, the U.S. government raised the tariff rate from 34% to 84%, imposing "reciprocal tariffs" on Chinese exports to the U.S.

On April 9, 2025, the U.S. government announced an increase in tariffs on its exports to 125% following Beijing's announcement of retaliatory 84% tariffs on all U.S. imports.

On April 10, 2025, the U.S. government clarified that the 125% tariff on Chinese goods was in addition to a 20% tariff that Mr. Trump had already imposed on China, bringing the total tariffs on China imposed by the Trump administration to 145%.

China’s Retaliatory Tariffs on the U.S.:

On April 4, 2025, China’s Customs announced countermeasures, including an additional 34% tariff on all U.S. goods.

On April 9, 2025, China’s Finance Ministry imposed an additional 50% tariff on U.S. goods, bringing the total import tax on all American products to 84%. The first affected items included rare earths, soybeans, automobiles, and 134 other categories.

This escalation in tariffs marks a significant intensification of the trade dispute between the world’s two largest economies. The increasing tariff pressure on Chinese imports highlights the current economic tensions and the complex challenges faced by global supply chains. The U.S.’s new tariff policy is not merely retaliatory but represents a strategic move to reshape global supply chains. The U.S.’s decision to escalate tariffs against China is a grave mistake, severely infringing on China’s legitimate rights and undermining the rules-based multilateral trading system.

Impact on China’s Polyether Exports

Cost Increases & Tariff Effects on U.S. Manufacturers

U.S. domestic manufacturers are already grappling with raw material price volatility, and now the costs of these critical materials have surged further. While the tariffs weaken the competitiveness of Chinese products, they also force U.S. manufacturers to bear additional costs or seek alternative suppliers from other countries. However, given China’s dominance in chemical production like polyether polyol, finding equivalent substitutes may prove difficult and expensive, especially for smaller manufacturers with limited options. This will lead to higher production costs, squeezing profit margins for U.S. manufacturers.

Impact on Downstream Industries

The tariff hikes significantly affect the downstream polyurethane supply chain. Key industries—including automotive, construction, furniture, packaging, and footwear—will face rising production costs, which manufacturers will likely pass on to consumers. This will exacerbate cost pressures across these sectors, straining profitability, competitiveness, and production stability.

Moreover, expectations of an economic downturn have heightened market risk aversion. Trade policy uncertainty, inflationary pressures, and potential demand slowdowns are prompting many companies to delay investments or scale back production. As consumer confidence declines, particularly in non-essential goods, the ripple effects could become more pronounced, further increasing contraction risks for these polyether-dependent industries.

China’s Polyether Polyol Export Diversification Strategy

To counter U.S. tariffs, Chinese manufacturers are shifting focus to alternative export markets such as Southeast Asia, Europe, India, and the Middle East. The U.S. tariffs have disrupted traditional trade channels, placing heavy pressure on China’s polyether polyol exports. A diversified export strategy will help mitigate the adverse effects of tariff hikes on Chinese exporters.

Meanwhile, due to global overcapacity and high production costs, an increasing number of European chemical firms are reassessing their strategies and shutting down facilities, creating opportunities for Chinese manufacturers. As some European producers scale back operations, Chinese manufacturers are stepping in to fill supply gaps with competitive offerings. Additionally, Europe’s green transition aligns with China’s sustainability strategy, particularly the growing demand for eco-friendly and energy-efficient polyurethane solutions, opening new avenues for Chinese exports.

Outlook

On April 10, 2025, Trump announced a 90-day tariff suspension on 75 countries, including Vietnam.

In 2024, only 3% of China’s polyether exports went to the U.S., minimizing the impact on raw materials. According to PUdaily’s research, the initial polyether export tariff was around 51.5%. The effects of this week’s U.S. tariff hike on polyether remain to be seen, but downstream industries are likely to bear a greater impact than raw material suppliers.

Top 10 Export Destinations for Chinese Polyether by Volume (2024):

Turkey, Vietnam, India, Russia, Brazil, UAE, South Korea, Mexico, Indonesia, and the U.S.

Since Trump has suspended tariffs for 90 days on non-retaliatory countries like Vietnam, the immediate impact on China’s polyether exports to Southeast Asia is expected to be minimal.

Source: PUdaily.com

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