Protectionism – Small Moves Hurt Exporter Profits, Large Moves Hurt Economies

C-MACC Sunday Executive Summary

Protectionism – Small Moves Hurt Exporter Profits, Large Moves Hurt Economies

• Before President Trump raised the notion of possible tariffs, trade was going to be a problem for many polymer markets in 2025 because of growing surpluses and some steep cost curves.
• Low-cost producers will likely need to lower international pricing to push more high-cost producers out of the market and we would expect some tariff moves on polyethylene in 2025, as we saw for PVC in late 2024.
• Low tariffs will likely not change much trade, just drive lower margins for the low-cost producers. Higher tariffs could protect local industry but will cause local price inflation and may be unpopular as a result.
• China is more competitive than many realize or accept today, as the refining integration with chemicals combined with attractive refinery input prices can drive some of the lowest incremental chemical costs globally.
• Otherwise, we look at a short-term possible jump in US ethylene and polyethylene because of turnarounds. We talk about how much hydrogen business there might be in 2025, and we predict a bad year for recycling.

Exhibit 1: If you are an exporter, where you are on the cost curve matters; if you are low cost, you can afford to take the tariff hit; if you are high cost, a tariff may be the end of the road. Any country in a high-cost region will need to place very high tariffs on imports to discourage imports from a very low-cost region.

Source: C-MACC Analysis, January 2025