The Impact Of Trump’s Victory On The Chemical Market And Countermeasures

With the new Trump administration officially taking office on January 20, 2025, a series of policy reshaping work involving energy, sustainable development and trade is about to begin.

Chemical Market Analytics brings the latest market insights, trying to deeply understand how these policy changes reshape production processes, adjust tariff systems, and change market structures

I. Energy

Trump advocates: exploit fossil energy as much as possible, support energy infrastructure projects, promote upstream development, and lift existing restrictions.

Direct impact: Overall beneficial to the supply of oil, gas and petrochemical raw materials.

1. Although approving infrastructure projects is conducive to attracting long-term investment, US oil companies may adhere to capital odds and maintain moderate production.
2. A sudden increase in US oil production may prompt Saudi Arabia to increase production rapidly, resulting in oversupply and triggering a price war.
3. Increases in oil and gas volume and declines in prices will increase raw material supply, reduce raw material costs, and benefit the petrochemical market.

II. Tariffs

Trump advocates: increase tariffs and may impose trade restrictions on Chinese companies

Direct impact: Restrictions on Chinese manufactured goods may boost US manufacturing, but will also increase consumer purchase costs.

It is very likely to restart the trade war with China and impose universal trade tariffs

1. The United States imports about 21 million tons of basic chemical products each year and exports about 65 million tons
2. The decline may repeat 2018, affecting US exports, and global trade is expected to undergo a major reshuffle
3. If tariffs are extended to Asia or the Middle East, the export of a variety of basic chemical products will be directly or indirectly affected.
4. Export restrictions on manufactured goods may boost long-term demand for US manufacturing and domestic chemical products
5. Trade tariffs will be countered by related markets, creating investment barriers and decoupling from US chemical producers. In the long run, this will reduce the productivity of the global chemical industry

III. Geopolitics

Trump advocates: reducing aid to Ukraine and support for Israel

Direct impact: An early end to the Russian-Ukrainian conflict may improve Europe’s energy supply and reduce costs, and post-war reconstruction will stimulate demand for related industrial chains in the construction industry.

Beneficial to the European chemical market

1. Increase the supply of Russian oil and products
2. Improve Europe’s energy supply and costs, increase the operating rate of chemical assets and potential manufacturing demand.
3. It will help the EU regain its cost advantage and divert trade to other markets
4. Post-war reconstruction will stimulate demand for construction products and help boost consumption of related chemicals

IV.Sustainable development

Trump advocates: No intention to support global carbon reduction initiatives or any plastic production regulations. Clearly opposes tax credits and subsidies for electric vehicles.

Direct impact: Turning to pro-manufacturing investment and reducing green energy subsidies will help US oil demand remain at a high level in the long run

1. China’s energy-specific investment, such as solar panels, batteries, etc., will catch up and further demonstrate its advantages
2. The backlog of comprehensive renewable hydrogen energy projects in the United States will be frustrated, hindering the growth of the global low-carbon hydrogen and derivatives market.

How to deal with it?

1. Adjustment of the global chemical industry structure

Faced with the trade policy uncertainty and market challenges that may be brought about by Trump’s election, Chinese chemical and new materials companies will reduce their dependence on the US market by exploring emerging markets such as Southeast Asia, Latin America, and Africa. At the same time, they will also strengthen cooperation with neighboring countries and regions by increasing participation in regional trade agreements (such as RCEP) and opening up broader sales channels.

Although the United States will experience green downgrades, China will continue to promote sustainable development in the face of other global markets, meet the environmental protection requirements of the international market through environmental protection and green chemical products, and improve market competitiveness.

In addition, mergers and acquisitions between Chinese and American companies and exchanges of scientific and technological talents between China and the United States are likely to face greater pressure during Trump’s second presidency. From the perspective of Chinese chemical and new materials companies, the trade uncertainty that may be brought about by the new Trump administration will force Chinese companies to further adjust and actively respond to the challenges brought about by Trump’s election through various strategies such as market diversification, increasing product added value, optimizing supply chains, strengthening compliance management, strengthening customer relationships and improving internal management. These measures not only help companies maintain their competitiveness in an uncertain international environment, but also lay the foundation for their long-term development

2. Reshaping resilience of the global supply chainIn China, domestic companies will also enhance supply chain resilience, improve safety, accelerate the localization of key raw materials, optimize and diversify supply chains, reduce dependence on a single market, and reduce potential supply chain risks. It is not ruled out that independent research and development will be carried out under the policy support of the Chinese government to break through the “neck” restrictions.

The global chemical and new materials system may re-establish multiple supply chain systems in the Sino-US trade friction. It is possible for Chinese companies to establish local production bases in target markets while expanding overseas markets, reduce tariffs and transportation costs, and enhance market adaptability.