Published by Global Banking & Finance Review®
Posted on April 4, 2025
3 min readLast updated: January 24, 2026
Add as preferred source on GoogleTrump's tariffs threaten global petrochemical demand, forcing capacity cuts and reshuffling trade flows. Asian and European producers face added pressure.
By Mohi Narayan
NEW DELHI (Reuters) - Sweeping new U.S. import tariffs threaten to further erode demand for global petrochemical producers and accelerate capacity cuts in an industry plagued by weak margins, industry officials and analysts said.
Tariffs announced by President Donald Trump on Wednesday are expected to drive up prices for goods such as electronics, appliances and packaging, denting consumption and curbing demand for the petrochemicals used to make plastics and industrial chemicals.
While imports of oil, gas and refined products were exempt from Trump's tariffs, refining margins in Asia for key petrochemical feedstock naphtha plunged 13% to $73.07 per metric ton over Brent crude on Thursday, their lowest since January 17.
"In the short-term, say two to three years, demand is going to be hit in export-based economies and if tariffs are imposed without further changes, the recovery in margins will be pushed out by six months to one year," said Pankaj Srivastava, senior vice president at Rystad Energy, said.
"Those economies will be under pressure to lower utilisation rates at their plants and shut some of the existing loss-making assets," he added.
Naphtha margins reached as high as $257 per ton in March 2022 amid fears of supply disruptions on the Black Sea route due to the Russia-Ukraine war.
Since then, margins have collapsed as global petrochemical demand has softened while new capacity has come online, mostly in China. Several consultancies forecast a recovery only by 2027-28, when Chinese capacity additions slow.
Major producers in Asia and Europe have been offloading assets and shutting aging plants, while U.S. operators have switched to cheaper feedstocks such as ethane over naphtha to weather the downturn.
Industry insiders now expect further industry pain in the aftermath of Trump's tariffs, with some producers in Asian economies including export powerhouses Taiwan, South Korea and Japan likely facing added pressure to shut.
Plants are already running at minimum rates due to the weak margins and tariffs might force them to make the tough decision to shut down, said an official at a global petrochemical trader, declining to be identified as he was not authorised to speak with media.
Import levies could also force a costly reshuffling of trade flows and supply chains already upended by sanctions on Russian oil exports and Houthi attacks in the Red Sea.
China and the European Union have vowed countermeasures.
(Reporting by Mohi Narayan; editing by Tony Munroe and Sonali Paul)
The article discusses the impact of Trump's tariffs on the global petrochemical sector, potentially worsening existing challenges.
Tariffs could lead to reduced demand, forcing producers to cut capacity and possibly shut down loss-making assets.
The recovery in margins might be delayed, and trade flows could be reshuffled, affecting global supply chains.
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