The implementation of new U.S. import tariffs is expected to negatively impact global petrochemical producers, leading to further reductions in demand and potentially accelerating capacity cuts in an industry already struggling with low profitability, as per industry experts and analysts.

The tariffs, recently imposed by President Donald Trump, are likely to result in increased prices for goods such as electronics, appliances, and packaging. This is anticipated to reduce consumption and demand for the petrochemicals essential for producing plastics and industrial chemicals.

Although the tariffs do not cover imports of oil, gas, and refined products, refining margins in Asia for vital petrochemical feedstock naphtha have declined significantly. This has put pressure on export-based economies, with predictions of delayed margin recovery and potential plant closures to offset losses.

In recent months, naphtha margins surged due to supply concerns related to the Russia-Ukraine conflict, but they have since plummeted due to softer global petrochemical demand and the introduction of new production capabilities, particularly in China.

To weather the challenging market conditions, major petrochemical producers in Asia and Europe have been divesting assets and shutting down outdated facilities. The impact of the imposed tariffs is expected to exacerbate the industry's challenges, potentially leading to shutdowns in export-reliant economies like Taiwan, South Korea, and Japan.

The tariffs could also disrupt trade flows and supply chains, adding to the existing complications caused by sanctions on Russian oil exports and other geopolitical factors. China and the European Union have expressed intent to retaliate against the tariffs.