Revised: US tariffs exempt key petchems; can PE exports survive the retaliation?

Certain grades of PE, PP, and PET are among the list of exemptions for reciprocal tariffs. Considering the net-exporter status of the US in PE, the US government seems to be aiming to avoid retaliatory tariffs, while it is yet to be seen whether partner countries will accept this move - apparently China won’t - as broader tariffs on other goods will still disrupt trade flows, increase production costs for downstream industries, and strain global supply chains.

*Corrected as certain grades of PP and PE since the exemption covers only a specific amount of tariffs, not regular PP and PE granules.

US President Trump announced broad tariffs on approximately 90 countries on April 2, but a government document revealed exemptions for crude oil, NGL, and key petrochemical products including ethylene, propylene, certain grades of polyethylene (PE), polypropylene (PP), and polyethylene terephthalate (PET). Additionally, other chemical products under HTS code 39, such as polyamides, polyester, epoxide resin and silicones were also exempt. The exemptions suggest an effort to shield critical raw materials from cost increases while targeting other sectors.

Despite notable exemptions, styrene, polystyrene (PS), and polyvinyl chloride (PVC) will still be subject to tariffs, while ethane was also excluded from the exemption list. The full list of products exempted from US tariffs can be seen here.

Will the US shoot itself in the foot over PE exports?

The exemptions suggest an effort to protect the petrochemical industry from rising costs, ensuring stable supply chains and preventing price inflation in essential materials. However, the exemption list includes products that the US has a supply surplus with a net-exporter status as in crude oil, NGL, ethylene, and some certain grades of PE. This move apparently aims to deter retaliatory tariffs in a bid to maintain export flow.

Earlier in the week, US President Trump said that they would consider lowering the tariff rates if trade partners took measures that help US exports. Whether this exemption will be enough to address the possible disruption in the PE trade flow of the world’s major exporter is yet to be seen since it is not known if the main partner countries in North and South America as well as the European Union will reciprocate it by lowering retaliatory tariffs.

Door to China closed for US PE

ChemOrbis Supply Wizard suggests that China is the biggest buyer of US PE, closely followed by the EU27 and Mexico. These three along with Canada - where big retaliatory tariffs are applied - constituted 42% of the overall PE exports of the US in 2024.
Later on Friday, April 4, China immediately retaliated with 34% tariffs on all US imports without an exemption. Considering the huge capacity additions in China and the broader damage it gets from the trade war Trump started, US PE will surely lose its main market in China.

Will EU delist US PE from retaliatory tariffs?

The answer is not easy. Around mid-March, the EU said they remained open to negotiations and regretted the decision when they announced counter-tariffs. There have also been industry associations including the European Plastics Converters Association (EuPC) and Plastics Europe, voicing their concerns over the threat these proposed tariffs as countermeasures on Europe’s plastics converting industry like increasing costs, decreasing competitiveness, higher consumer prices and possible job losses.

However, the door to the European Union for US PE may not be completely closed as in the case of China. This is because the situation is not the same for the European PE market as it was 7 years ago when the first trade war was in place. 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’s PE imports by far, displays ChemOrbis Supply Wizard. The US was the top supplier of the EU with a 35% share in 2024.