Chemicals Update: Trump’s planned policies – Impact on the chemical industry and shipping

The re-election of Donald Trump is poised to reshape the global chemical industry and trade flows significantly. His proposed policies on tariffs, energy, and international trade are expected to create both opportunities and challenges for chemical manufacturers worldwide.

Impact on the Chemical industry

Trump’s agenda prioritises domestic production, with increased tariffs aimed at reducing reliance on imports. Proposed duties of up to 60% on Chinese goods, and baseline tariffs of 10-20% on other imports, could significantly disrupt the global chemical supply chain. These measures would particularly affect sectors heavily reliant on cross-border trade. For instance, U.S. polyethylene (PE) producers, which currently export large volumes to China, may face reduced market access. In 2023 alone, the U.S. exported 1.3 million tonnes of linear low-density polyethylene (LLDPE) to China​.

Conversely, these restrictions may create an incentive for domestic production. U.S. demand for chemicals like polypropylene (PP) and ethylene glycol could rise, fostering local manufacturing growth. However, the increased cost of imports, coupled with retaliatory tariffs from trading partners like China and the EU, could lead to higher input costs for downstream industries, potentially suppressing overall chemical demand.

Additionally, Trump’s energy policies, characterised by support for fossil fuel production and infrastructure projects, could provide cheaper feedstocks for petrochemical companies. However, a rollback of environmental regulations may delay the transition to sustainable chemical practices, impacting long-term investment strategies in green technologies.

Trade flow disruptions

Trump’s isolationist trade policies, including a possible escalation of the U.S.-China trade war, are expected to cause significant shifts in international trade flows. European chemical companies, which export substantial volumes to the U.S., could face reduced competitiveness due to higher tariffs. For instance, commodities like benzene and paraxylene, where the U.S. accounts for over 70% of European exports, may see trade volumes decline sharply.

In response, both U.S. and Chinese chemical exports may seek alternative markets, with Europe emerging as a key battleground. Increased imports of Chinese finished goods into Europe, resulting from restricted U.S. access, could further strain European chemical manufacturers​.

Moreover, the potential lifting of sanctions on Russia under a Trump presidency could reconfigure energy and raw material trade flows. An influx of cheaper Russian oil and gas might lower feedstock costs in Europe, aiding chemical producers but complicating global competitive dynamics​.

Strategic implications

While Trump’s trade and energy policies may bolster some segments of the U.S. chemical industry, the broader global implications are mixed. Increased tariffs and retaliatory measures could fragment international markets, reduce efficiency, and disrupt established supply chains. Conversely, regions like Europe might capitalise on redirected trade flows, albeit with increased pressure on domestic manufacturers.

For the chemical industry, the key to navigating these disruptions lies in diversification and strategic adaptation. Investments in local production capacity, coupled with agile responses to shifting trade policies, will be essential for companies aiming to thrive in this new landscape. As the global economy recalibrates, the chemical sector must brace for both volatility and opportunity in equal measure.

The impact on shipping

It is hard to predict the direction in which global chemical cargo flows will shift, however, it seems very likely that if tariffs become commonplace, this will reduce the traded volumes. The rise of protectionism in the U.S, whose chemical trade is mostly with Asia and Europe, will cause declines in the volumes—and freight rates—on the Transpacific and Transatlantic trade lanes. Europe, as the highest-cost producer, will have little choice but to continue with its painful capacity optimisation and may also resort to import tariffs to protect itself from Asian export, diverted away from the U.S. Ultimately, Asian producers will face closures, or at the very least low operating rates for 2025, unless domestic demand picks up significantly, which is unlikely. An end of the war in Ukraine may lead to cheaper oil and gas, if the sanctions are lifted—but this could be counterbalanced by OPEC output cuts. Thus, the overall result from Trump’s planned policies will possibly reduce global chemical trade, done at shorter distances—and this is not good news for chemical shipping. This will be amplified by reduced export volumes of major chemical products due to various supply constraints.

Aggressive ordering throughout 2024 has brought the chemical orderbook to over 10% from the existing fleet. In product tankers it reached above 18%, with roughly one MR tanker scheduled for delivery every 3 days throughout 2025. And despite the fact that about 250 chemical tankers with more than 3.2m dwt capacity are already 25 years old or older, it would be unrealistic to expect all of them to be scrapped next year. At a scrapping rate of 50%, 2025 will see negative chemical fleet growth of -1.3%, but in 2026 and 2027 it would be 3% and 4.5% respectively, before becoming negative again in 2028 at -2.2%.

By Plamen Aleksandrov, Head of Research – Chemicals, SSY.