Tariff war with EU, Canada risks billions of pounds of US PE production

Potential tariffs on resins and plastics products sold from the U.S. to the European Union put a potential $1.6 billion U.S. trade surplus from 2024 at risk in 2025.

Retaliatory tariffs from Europe would particularly hit U.S. exports of polyethylene resin.

In 2024, about 15 percent of U.S. PE resin — around 4.4 billion pounds of material — was sold to EU countries, according to Esteban Sagel, principal with Chemical & Polymer Market Consultants in Houston.

The possibility of counter tariffs "compounds the challenges U.S. [PE] producers already face if the U.S. government proceeds with its trade war," Sagel said. He added that when factoring in more than 2 billion pounds of annual PE exports to Canada, the equivalent of the annual production of six world-scale PE plants "is at risk."

"To remain competitive, U.S. [PE] exporters will likely have to absorb the additional tariffs rather than pass them on to PE buyers," Sagel said. "Otherwise, they risk losing market share to Middle Eastern suppliers, particularly in Europe, where cost-advantaged Middle Eastern producers are well-positioned to take their place."

According to Sagel, at least one Canadian PE maker doesn't plan to pass the tariffs on to buyers at present, believing the tariffs will be short-lived and will serve as a negotiating tool for a renegotiation of the USMCA trade agreement.

"However, if tariffs become permanent, Canadian producers will have strong incentives to diversify their markets — a shift that would require infrastructure investments but could ultimately displace U.S. producers in Europe," he said.

In a March 20 statement, Perc Pineda, chief economist with the Plastics Industry Association, said that in response to 25 percent tariffs on steel and aluminum imposed by the U.S. on March 12, the EU has proposed countermeasures that include resin and plastic products.

According to Pineda, the EU commission has identified more than 1,700 products for possible countermeasures, including 60 resin and plastic products. When matched to U.S. product codes, the proposed EU tariffs are estimated to impact $5.9 billion in U.S. resin and product exports to the EU, based on 2024 export values.

The U.S. imported $4.3 billion of the targeted resin and plastic products from the EU in 2024 while exporting $5.9 billion, accounting for the $1.6 billion surplus described by Pineda.

While the European Commission hasn't included plastic equipment and molds in its proposed countermeasures, Pineda said U.S. plastics equipment and mold makers that use steel and aluminum imported from the EU "are already affected by the U.S. tariffs."

The EU is accepting comments on a 99-page list of potential counter tariffs until March 26. The list includes grades of polyethylene, olefin, nylons and a range of end products using those materials.

Those duties would be part of a two-stage response that would begin April 1 with tariffs on some items that the EU had suspended under President Joe Biden's administration.

An additional $19 billion in tariffs are being considered for an April 13 escalation, according to the Associated Press.

"We firmly believe that in a world fraught with geopolitical and economic uncertainties, it is not in our common interest to burden our economies with tariffs," European Commission President Ursula von der Leyen said in a statement.

Virginia Janssens, managing director at trade group Plastics Europe, said the imposition of tariffs, particularly on industrial goods such as plastics, "will disrupt supply chains, raise costs for businesses and negatively impact consumers on both sides of the Atlantic."

Exports have become a much larger part of U.S. PE resin production in the last decade as billions of pounds of capacity have been added to take advantage of low-priced shale gas and shale oil feedstock. The amount of capacity added was aimed at export markets, as it far exceeded what was needed to meet domestic demand growth.

As recently as 2017, less than 25 percent of PE resin made in the U.S. was exported. That figure has surged in recent years, crossing 40 percent for the first time in 2023 and reaching an all-time high of 46.6 percent in 2024. The PE export market share was down slightly to 45 percent in the first two months of 2025.

U.S. PE makers "face a dilemma" if EU tariffs are fully implemented, according to Phil Karig, principal at the Mathelin Bay Associates consulting firm in St. Louis. Those firms "need to be competitive with Mideast-based resin producers located closer to Europe," Karig said.

"If they're not, any large-scale reduction in PE exports … could reduce domestic capacity utilization to the point where resin prices in the U.S. face substantial downward pressures."

He added U.S. resin makers could shift some exports from their U.S. assets to their Canadian production units to avoid tariffs, but at least some PE producers and some PE export volume "is still likely to have to originate in the U.S."

Karig also said that while the cost advantage of making PE in the U.S. from low-cost natural gas remains in place, recent reductions in crude oil prices — partly due to "a muddy outlook for global crude oil demand" — combined with recent higher natural gas prices "have substantially reduced" the relative cost advantage of making PE from natural gas rather than oil-based feedstocks.

There's also a chance the impact of proposed counter tariffs "may not be as severe as anticipated," according to Howard Rappaport, a market analyst with financial firm StoneX in New York.

"The first thing to consider is that with most global commodities, markets can and will react to the looming prospect of disruption ahead of the actual disruption," Rappaport said in an email to Plastics News.

Rappaport pointed out that industry statistics show that most U.S. PE resin exports go to Northeast Asia — mainly China — or to Latin America.

"Only a minority share of [U.S.] produced PE makes its way into Europe," he said. "The Middle East has always played a major role as a supplier of [PE] products into the EU."

However, Rappaport added there's a chance of additional reciprocal tariffs between the U.S. and China, as well as North American trading partners Canada and Mexico, which also have been targeted by recent U.S. tariffs.