Resin makers and compounders are bracing for potential impacts of tariffs the U.S. government placed on goods from Canada, Mexico and China on Feb. 1.
The tariffs could raise prices for many materials, as well as feedstocks and finished products. They also could lead to retaliatory tariffs on products exported from the U.S., including polyethylene resin.
Plastics and chemicals firm BASF said in a statement that, as a global company, the firm supports conditions that allow for free trade of goods and services.
"Now that we have information on the relevant U.S. tariff rates, the goods within scope, and the export countries at issue, as well as the first retaliatory measures, we can begin an assessment of the impacts on our business and markets, which will take time to complete," officials said.
Local production is essential to BASF's strategy in North America, they added, as almost 80 percent of the firm's sales in 2024 came from products manufactured locally.
"This high percentage highlights our commitment to the regional economy and workforce and to ensuring we meet customer needs with locally produced goods," officials said. "We continue to carefully monitor for any additional retaliatory tariffs or other measures that may be imposed by other countries, as well as further developments in U.S. tariff policy."
Compounding firm Techmer PM "is continuing to work on understanding the tariff implications on our business as well as collaborate with customers and suppliers to minimize any potential impacts," CEO Michael McHenry said in an email to Plastics News.
"We hope the trade challenges between the impacted countries are resolved quickly," he added.
A sharp increase in tariffs potentially poses a short-term challenge for the industry, according to Howard Rappaport, a market analyst with StoneX in New York.
"Beyond the fact that we import a significant amount of hydrocarbons [crude oil and natural gas] from Canada, there is also a large volume of both resin pellets, semi-finished and finished goods traversing the border in both directions," he said in an email.
Rappaport added that Canadian manufacturers export significant volumes of both polyethylene and polypropylene into the U.S. market. Companies like Dow, Nova and Heartland Polymers "routinely ship hopper cars of PE and PP over the border into the U.S.," he said.
Plastics processors in the northern states and parts of the Midwest may experience short term price adjustments if the negotiations on tariffs drag on, Rappaort added. Canadian companies importing specific types and grades of U.S.-made may also face short term price adjustments, he said. For Mexico, a large importer of U.S. resins, the tariffs "may open doors" in North America for alternative import sources of supply from offshore.
The current tariff situation "is like a game of chicken, where two cars head at each other at full speed and each has the option of deciding to either continue…or to risk embarrassment by being the first driver to veer out of the way," according to Phil Karig, principal of the Mathelin Bay Associates consulting firm in St. Louis.
He added there are only a few outcomes that the market can reasonably expect from the tariffs: the U.S. or its trading partners backs down first and finds itself in a weakened negotiating position, or both sides refuse to back down and "face potentially catastrophic economic consequences that could evoke memories of the retaliatory tariffs of the 1930s."
Karig then said the most favorable outcome would be one where everyone backs down and agrees to negotiate new trade agreements under calmer circumstances. He added that although it's most likely that a tariff stand-off will not last very long, there's "a not insignificant risk" that the U.S. will not be able to quickly agree to negotiations with all of the current tariff targets.
Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston, pointed out that the U.S. currently imports almost 7 billion pounds of PE resin and almost 800 million pounds of PP resin from Canada and Mexico every year. Historically, imports from those countries have been duty free and, particularly from Canada, considered almost domestic supplies, he said.
Sagel added the tariffs will immediately increase the cost of those imported polymers by 25 percent, which makes them uncompetitive. Exporters in Canada and Mexico then may decide to drop their export prices for the spot market to compensate for the tariffs.
In the contract resin market, Sagel said companies with contractual obligations with Canadian suppliers will be paying 25 percent more for their raw materials than companies with contracts with U.S. based companies.
"This I fear will make them uncompetitive vs. companies sourcing from U.S. suppliers," he added.
The tariffs "are a massive shock to the system," Sagel said. Almost 7 billion pounds of imports "is not an insignificant amount of polyethylene," he added. "Depending on whether these tariffs become permanent or not, I foresee a massive rethink of how the market operates."
The American Chemistry Council, which represents plastics resin makers, in a Feb. 3 statement urged the countries to "negotiate a solution to the issues behind these orders as soon as possible."
The statement was a more muted reaction than others in the plastics and chemical sectors had to Trump's tariff proposals in.
ACC pointed to a chemical industry trade surplus of more than $30 billion in 2023, with those exports supporting 200,000 jobs.
"America can compete by safeguarding access to low-cost, essential imported inputs and securing fair, competitive access to key customer markets around the world," ACC said. "ACC wants to work constructively with the administration to advance a trade agenda that addresses genuine challenges to our supply chain resiliency."
"Canada and Mexico are our industry's largest trading partners," ACC said. "The American chemical industry imports materials, many of which are unavailable in the United States, adding value and supporting other manufacturing supply chains domestically and abroad, through our exports."
Trump on Feb. 1 put 25 percent tariffs on most goods from Mexico and Canada and additional 10 percent tariffs on China, as well 10 percent tariffs on Canadian energy exports. At the time, he said the tariffs would take effect on Feb. 4.
The status of the tariffs, and potential retaliatory measures from Canada, Mexico and China is still uncertain. On Feb. 3, Trump said he reached agreements with Mexico and Canada to pause U.S. tariffs for one month. Trump did not pause tariffs China, which are scheduled to start on Feb. 4.
PN Assistant Managing Editor Steve Toloken contributed to this story.