Impact of the Latest U.S.–China Trade Agreement on the Chemical and Materials Industry

I. Overall Assessment: From Confrontation to a Temporary Pause – A Structural Breathing Space

The new trade agreement does not change the fundamental competitive nature between China and the U.S.,but it does provide the chemical and materials industry with short-term relief.

Key takeaways:

• Partial tariff cuts or suspension → reduced raw material and downstream cost pressure.

• Looser export controls and rare-earth policies → temporary recovery in key intermediate supply.

• Improved investment expectations → global markets lower the risk premium on manufacturing and new materials.

In short, structural rivalry remains, but cyclical breathing room emerges.

II. Short-Term Impact (0–6 Months)

1. Chemical Raw Materials and Intermediates

Impact: Prices likely to weaken or fluctuate mildly downward.

• U.S. exports of specialty chemicals (additives, polymer aids, etc.) to China become cheaper after tariff cuts, increasing import competition.

• If China relaxes export controls on critical intermediates (rare earths, fluorochemicals, lithium precursors), global tightness will ease, softening prices.

• Most affected product chains:

  • Isocyanates (MDI/TDI) – downstream sectors (construction, auto interiors) improve modestly; oil costs stable → price fluctuation.

  • Propylene oxide & polyether polyols – benefit from smoother trade and lower freight rates; Asia regains export edge.

  • Engineering plastics & polycarbonate (PC) – recovering demand expectations lift price floor.

Summary: Short-term “restocking + mild recovery” period, not a new bull cycle.

2. Supply Chain and Logistics

Impact: Cost reduction and efficiency improvement.

• Lower tariffs allow companies to resume direct shipments, avoiding costly rerouting through third countries.

• Port throughput for chemical goods in U.S. West Coast and China’s coastal terminals is expected to return to positive growth (Q1–Q2).

• Especially beneficial to small and mid-sized chemical traders as clearance and insurance costs fall.

3. Investment and Market Sentiment

Impact: Lower risk premium, valuation recovery.

• Both U.S. and Chinese manufacturing investment are projected to rebound moderately.

• Listed companies in new energy, electronic chemicals, and rare earths may see valuation uplift.

• Supply-chain companies in Japan, South Korea, and Taiwan benefit from a “regional détente” signal.

III. Medium-Term Structural Shifts (6–18 Months)

1. Global Supply Chain Moves Toward “Soft Diversification”

• Companies will not immediately reverse Southeast Asia relocation but will slow down new capacity migration.

• China maintains competitive advantage in basic chemicals and upstream intermediates (cost, scale, ecosystem).

• The U.S. continues promoting localization of critical materials (batteries, EVs, semiconductors) but remains import-dependent for intermediates.

For your clients in polyurethane, polyether, and epoxy resin chains:

U.S.-bound exports may rebound 5–10% short term,but secondary tariff risk may reappear after 2026 due to political shifts.

2. Rare Earths and Critical Minerals: China Retains Pricing Power

• Even with loosened export controls, China still dominates deep-processing and refining.

• The agreement effectively allows economic leverage to remain with China despite political concessions.

• Short-term supply normalization possible, but long-term policy volatility remains.

3. Trade Competition Shifts: From Price to Compliance

• The new framework emphasizes regulatory transparency and monitoring, particularly in synthetic drugs and precursor chemicals.

• Export licensing, traceability, and HS code compliance become new competitive barriers.

• Large multinational companies gain; smaller traders without compliance systems will be marginalized.

IV. Long-Term (2–3 Years) Trend Scenarios

Trend Direction	Description	Impact on Chemical Sector
Dual Supply Chains	Both countries maintain semi-independent systems with limited trade windows	ASEAN and Mexico emerge as key intermediaries
Green Trade Rules	Stronger cooperation on carbon and ESG standards	Higher compliance costs but improved brand premium
Investment Re-shoring + Localization	Both countries encourage domestic high-end chemical investment	Capital shifts toward “clean materials” and specialty chemicals

V. Sectoral Impact Snapshot

Segment	Outlook	Commentary
Polyurethane chain (MDI/TDI/polyether)	Slightly positive	Demand from construction & auto recovering; U.S. export orders resume
Engineering plastics / composites	Neutral to mildly bullish	U.S. buyers resume procurement; automotive & electronics drive rebound
New energy materials (Li, Ni, graphite)	Short-term correction, long-term bullish	Supply normalization → near-term softness; long-term strategic strength
Agrochemicals & intermediates	Mildly positive	China’s purchase of U.S. agri-products boosts agrochemical demand
Specialty chemicals (semiconductor, photoresist)	Limited improvement	Export restrictions remain; decoupling continues

VI. Key Risks to Monitor

1. Political Reversal: Post-election U.S. policy may swing back toward protectionism.

2. Implementation Gaps: The agreement is not a binding treaty — enforcement could vary by sector.

3. Logistics Shocks: Red Sea disruptions or Panama Canal droughts could still affect flows.

4. New Barriers: Carbon border taxes or “green tariffs” may replace traditional duties.

VII. Strategic Recommendations for Industry Players

Strategic Area	Recommended Action
Procurement & Inventory	Leverage tariff window to restock; secure medium-term contracts
Export & Compliance	Build trade-compliance tracking systems for upcoming transparency rules
Investment & Capacity	Monitor U.S., Mexico, and ASEAN as chemical transshipment opportunities
Policy Intelligence	Maintain a “Tariff & Export Control Watch Database” to track volatility
Client Communication	Emphasize cost relief and supply stability to rebuild buyer confidence

In summary:The latest U.S.–China trade accord offers a temporary reprieve but not reconciliation.For the chemical and materials industry, the next 6–18 months present a window of stabilization and restructuring,before the next geopolitical cycle reshapes global trade once again.