Tariff havoc: Rewiring global petchem supply chain from feeds to finished goods

The global petrochemical sector stands at a turning point. Right after the US’s recent imposition of steep tariffs, both China and the EU have retaliated with countermeasures, further escalating tensions. In stark contrast, Southeast Asian nations, particularly Vietnam, Malaysia, Thailand, and Indonesia have signaled willingness to deepen economic ties with the US. India has also taken a cooperative stance, refraining from retaliatory tariffs and even pursuing deeper trade ties.

Later on Wednesday, the US decided to pause duties for 90 days on non-retaliating countries, which has buoyed the stock markets and energy prices to some degree. Despite this, market players will widely need time to digest and expect the dust to settle. This shifting alignment is poised to reshape the global petrochemical trade, with significant implications across the entire value chain; from feedstocks to monomers, polymers, and finished products. Here is a brief outlook of the anticipated consequences - both favorable and unfavorable - each region is expected to face.

Feedstocks: US ethane, propane glut looms

The US is a major exporter of ethane and propane, key feedstocks in petrochemical production. Traditionally, significant volumes were shipped to China and, to a lesser extent, Europe. In 2024, the US accounted for 62% of a total of 1.4 million bpd of LPG, which includes a high proportion of propane, and ethane China imported, according to analytics firm Kpler. Ethane, in particular, tells an even sharper story, China has relied almost exclusively on the US for this feedstock over the past seven years, with imports rising from zero in 2018 to 265,000 bpd in 2024.

If China includes ethane in retaliatory tariffs and closes the door to US ethane, the US will face a short-term glut, likely driving down domestic prices. This oversupply could delay new investment plans or even force operators to reduce output in the US. In the absence of Chinese demand, US exporters will need to pivot quickly to alternative markets, although scaling up volumes and developing logistics will take time.

On the flip side, China accounted for 57% of US ethane exports in 2024 and was also the top buyer of US LPG, taking in 27% of total exports of 2.2 million bpd. This mutual reliance creates vulnerabilities, but China may be better positioned to withstand the shock. According to Sinopec’s 2024 annual report, 70% of China’s 53 million tons/year ethylene capacity relies on naphtha, while only 8% uses ethane or LPG. In other words, Beijing has diversification on its side.

Meanwhile, China’s latest tariff response to ethane and LPG is still awaited. There are also speculations that China may exempt US ethane as they need competitive feedstocks. If not, China may have to pivot to alternative suppliers such as the Middle East, which would raise freight costs and undermine the competitiveness of some plants.

Still, Southeast Asian nations could benefit thanks to growing cracker and PDH (propane dehydrogenation) capacity. With the US seeking new markets, countries like Malaysia, Vietnam and Thailand may secure low-cost propane and ethane to feed their growing petrochemical industries. Vietnam has already secured long-term agreements for US ethane for its new ethane terminal to be finalized in 2027.

Monomers: Export realignment underway

US exports of ethylene, propylene, and their derivatives, especially monoethylene glycol (MEG), have traditionally been geared toward China and the EU. Losing these destinations could lead to significant oversupply and falling margins in the US. Plants tied to the ethylene value chain may be at risk of operating at uneconomic levels.

China, still reliant on imports for certain intermediates like MEG, would need to find alternative suppliers such as Saudi Arabia or Iran. While domestic production may be ramped up, the near term could bring supply instability and cost pressures.

Southeast Asia and India, however, are emerging as viable alternative buyers. India is expanding its petrochemical footprint and could integrate competitively priced US monomers into its supply chain, particularly under a future bilateral trade pact. Vietnam, with a strong polyester and textile base, could benefit from lower-cost MEG imports, helping improve export competitiveness.

Polymers: When China and EU are gone, SEA, India, and Türkiye may become the new growth frontier for US, but to what extent?

The US exports significant volumes of PE, especially HDPE and LLDPE, with China holding a share of 17%, the EU 15%, and Canada 7% in 2024. With these flows now disrupted, US producers will likely ramp up shipments to Southeast Asia, India, Turkey, and other emerging markets. However, considering nearly half of US PE exports are at risk, whether these markets will be able to compensate for the loss is doubtful apart from triggering global price wars and narrower margins.

China, despite building out its polymer self-sufficiency, will still need imports; however, it has more diversifications like in the upstream chain. In the absence of US supply, the country may boost imports from the Middle East or Russia while accelerating its domestic capacity buildup. According to ChemOrbis Supply Wizard, China has already added 1.8 million tons of PE so far in 2025 with more than 4 million tons slated to come for the rest of the year, in comparison to around 2.5 million tons of PE imports from the US in 2024.

Plus, up-to-date market information suggests that China’s National Tariff Commission announced on April 5 that it will impose a 20% tariff on all High-Density Polyethylene (HDPE) imports from the US starting May 1, 2025. This may suggest that other PE products including LDPE, LLDPE and metallocene LLDPE may not be subject to extra tariffs as long as further impositions are not revealed. Therefore, to what extent China will drop its PE imports from the US awaits further clarification.

Europe will also lose an important partner in the PE market, as long as the final list includes plastics as in the initial list. Whether some exemptions are provided or not will be followed.

ChemOrbis Stats Wizard suggests that the US had a market share of more than 35% last year in EU’s overall PE exports, offering competitive advantage to European buyers. If the door to Europe is closed for US PE, Saudi Arabia will step in to fill the gap in import demand. Plus, European producers will benefit from the lack of a competitive source, helping them recover margins. Nevertheless, paying more to local suppliers will raise consumer prices and weaken demand over time. It will also make European end products less competitive globally due to higher input costs.

Southeast Asia and India, meanwhile, stands to gain. With access to cheaper US-origin polymers, regional converters could enhance their cost competitiveness. However, local producers may come under pressure from cheaper imports.

ASEAN and India respectively constituted around 9% and 2% of overall US PE exports in 2024, ChemOrbis Stats Wizard suggests. Given the bigger losses of around 35% in China and the EU, and possibly elsewhere, neither SEA nor India can fully absorb the capacity that once flowed into the world’s two largest economies.

Another key to watch will be the real implementation of these tariffs. As in the case in China, India and Indonesia applied retaliatory tariffs but on US LLDPE imports, rather than HDPE and LDPE, although this information is not widely confirmed at the time of press. Whether there will be exemptions depending on the product in these tariffs will be critical to reshape the industrial fundamentals.

Türkiye, which has a market size of around 2.5 million tons and is heavily dependent on imports for PE particularly in HDPE and LLDPE, is also a crucial resort for US PE as no retaliatory tariffs have been announced so far. In 2024, Turkey formed around 4% of overall US PE exports. Turkish converters will likely benefit from competitive US prices, when the fog lifts, and there will be a shift in supplier panorama as the US may steal the market share of main competitors, namely Saudi Arabia and the EU, which will be focused on their sales to Europe.

Downstream products: Global manufacturing maps are redrawn

The final piece of the puzzle is downstream manufacturing. For decades, China has been the world’s largest producer and exporter of plastic-based finished goods, from toys and consumer electronics to packaging and textiles. With the US market now harder to access, Chinese manufacturers face a sharp demand shock, risking overcapacity and job losses.

Europe, losing competitive feedstocks as well as an important PE import source and facing higher polymer and eventually consumer prices in the local market, is also in a disadvantageous position to compete in global markets. Plus, it also faces flood risks of end products from China, which will again put European converters behind the eight ball.

The US, on the other hand, may experience shortages or higher prices on a wide range of finished plastic products as Chinese imports decline. Some domestic production may return, but gaps will emerge in the short term.

This could create opportunities for Southeast Asia and India. With lower labor costs and growing industrial bases, Vietnam and Thailand could attract investments from US firms looking to relocate production out of China. American brands may expedite shifts in assembly lines and contract manufacturing to these new hubs.

India, with its scale and skilled workforce, stands out as a long-term partner for integrated supply chains, from US feedstocks to India-made end products for global re-export.

Türkiye, strategically located between Europe and Asia, may also play a growing role as a downstream hub, especially for EU-bound goods avoiding direct US-Europe routes.

Although these changes won’t replace China’s market size anytime soon, they mark the beginning of a new global trade pattern, one that is more divided, more regional, and heavily influenced by geopolitics.