EU’s retaliatory move includes plastics, US PE imports to be hit hard

After the European Commission announced plans to implement counter tariffs on 26 billion euros ($28 billion) worth of US goods from April, the long-anticipated moment has arrived as a worsening trade standoff focuses not only on steel and aluminium but also on textiles, home appliances, and of course plastics and some polymers.

The EU will revoke the suspension of the 2018 and 2020 countermeasures against the US on April 1, which apply to a variety of products including some polymers and many plastics. Meanwhile, the EU will start a two-week consultation to select additional product categories, with the new measures targeting around 18 billion euros in goods.

Although the EU remains open to negotiations and regrets the decision, the tit-for-tat tariffs caused jitters in the plastics markets particularly among players who heavily rely on US polymer imports.

What is on the EU’s tariff hit lists for plastics and polymers?

As can be seen from the table here, the list entails a big variety of plastics and articles thereof, the tariffs of which fall under Chapter 39 in international trade classifications.

In terms of polymers, HDPE, LDPE, LLDPE and LLDPE metallocene are the main polymers in primary forms to be hit by the tariffs. Polyamides and silicones are also other polymers in primary forms within the scope of retaliatory tariffs.

The table also displays a long list of plastics end-products made from polymers including plates, sheets, film, foil and strip, floor coverings, tubes, fittings, boxes, cases, crates, sacks and bags, carboys, bottles, flasks, doors, windows and their frames etc.

PE market under focus: US PE import flow to EU will face a major blow

In this regard, it is crucial to note that the European PE market is not self-sufficient as the trade balance has shifted visibly over the past five years with imports exceeding exports, and the US has been a major PE supplier to the EU27 since then.

Therefore, these retaliatory tariffs will have the most severe impact on the European PE market in the plastics industry.

Today is not the same for Europe PE market as it was in 2018-20 during first trade war

These countermeasures are the same as 7 years ago during the first trade war; however, the situation is not the same for the European PE market as the importance of the US has grown notably particularly since 2020.

In line with the successive capacity expansions and cost advantage in the US, PE flow into the EU has risen steadily over the past 5 years, outpacing Saudi Arabia PE imports by far.

In 2024, according to ChemOrbis Stats Wizard Pro, US PE imports hit a record high at nearly 2 million tons, accounting for 13% of the bloc’s overall PE imports. When intra-trade is excluded, the US remained the major supplier to the EU with a market share of more than 35% last year. This was followed by Saudi Arabia and S. Korea, with respective shares of 20% and 9%.

Who will fill the gap?

Saudi Arabia and S. Korea will happily fill the gap, especially considering the heating competition among the main three PE exporters amid capacity additions from China.

Saudi PE will win back

In the EU27, Saudi Arabia was dethroned by the US first in 2020 and then in 2022, and its market share gradually has grown in the EU27 since then to be as big as almost double of Saudi Arabia in 2023 and 2024. Now,there is a chance that Saudi Arabia will be able to regain its lost market share in Europe.

Saudi Arabia has lost market share not only in Europe but also in China, the world’s still the biggest PE buyer. In the last two years, Saudi PE imports to China stayed behind the US PE imports, although the gap was not as large as in Europe. Apparently, the Trade War II will also help Saudi PE win back its top exporter status in global markets.

Will the absence of the US PE favor local European producers?

The European PE market - which has already been going through a major restructuring given the persisting margin squeeze- will not see competitively priced US cargoes, which may provide a long-awaited leverage for regional PE sellers to hold the market firm and recover margins.

They are likely to focus less and less on exports and prioritize their local sales in the coming term in the absence of a major import source. Whether this will be enough to slow down the restructuring process the region has been undergoing is yet to be seen, although the lack of access to cheap feedstocks, old plants and scale of economies may continue to hammer margins of regional sellers.

This retaliatory move is likely to favor European PE producers to some extent; however, it will also have side effects on consumer prices, as the lack of competitively priced US PE cargoes and paying higher prices to local suppliers will naturally result in higher consumer prices, which will weaken demand in the long run. Additionally, increased input costs could further reduce the competitiveness of European finished goods in global markets.

Uphill battle ahead for US PE: Shooting itself in the foot

The decision will have some consequences on both sides of the Atlantic. European PE buyers - and also Chinese and other North American ones - will lose the advantage of a competitively priced import source. However, this is indeed going to be a major headache for US PE sellers, as the US PE market is a net-exporter.

ChemOrbis Stats Wizard Pro suggests that China is the biggest buyer of US PE, closely followed by the EU27 and Mexico. These three along with Canada - where big tariffs are applied - constituted 42% of the overall PE exports of the US in 2024.

There comes this question: Where will the US divert this big amount of excess PE supplies in global markets?

Where can US PE exports go now?

Right off the bat, statistics may tell us that South America, ASEAN, Türkiye and India may emerge as potential markets, where US goods can be redirected in the coming term.

However, stats also point to around 6 million tons of PE supply that will flood the markets, which will be quite hard to be absorbed particularly in the midst of the ongoing economic challenges and demand hurdles these destinations have been experiencing for so long. Thus, US PE producers will have to slash operating rates in a bid to manage their supply pressure.

This also remains a challenge given the “drill baby drill” policy of the Trump administration, which will result in excess ethane supplies that will need to be directed to ethylene and PE production if not to be exported.