VINACHEM

Most chemicals exported from the 27 member countries of the European Union into the US will be subject to a 15% tariff on top of their selling prices under an agreement signed on July 27 between the US and the European Commission.

The tariffs, which will rise from about 1% on average, will come into effect on Aug. 1. Most other industrial sectors in the EU, including the auto industry, also face a 15% tariff. The increase comes as a blow to the European chemical industry, which is already struggling with high production costs and soft local market conditions.

The German Chemical Industry Association (VCI) says the 15% tariff is bad but could have been worse, given that US president Donald J. Trump had announced on July 12 that the US would impose 30% tariffs on EU goods. “Anyone expecting a hurricane is grateful for a storm,” VCI executive director Wolfgang Große Entrup says in a press release. “Further escalation was avoided. Nevertheless, the price is high for both sides. Europe’s exports are losing competitiveness. US customers are paying the tariffs.”

Some specialty chemicals for high-tech applications, including those for making semiconductors, will be exempt from the tariff, as will be some generic drugs, agricultural products, natural resources, and critical raw materials, the EC says. Most drugs and drug active ingredients, though, will be subject to the 15% tariff. Details about the specialty chemicals that are exempt have yet to emerge.

The new tariff regime is likely to have a significant impact on the EU chemical industry. The US is the sector’s biggest export market, accounting in 2023 for about $42 billion of its total sales of $723 billion, according to the latest data from the European Chemical Industry Council, Europe’s biggest chemical trade association.

VCI says it is looking to the German government to offset the impact of the tariffs and for the EC to continue negotiating with the US government to reduce them.

The expectation among analysts is that 15% is not where the tariffs will end up. “It seems unlikely, however, that this will be the end of the journey,” Paul Hodges, chairman of New Normal Consulting, and colleagues, write in The pH Report, their newsletter. “This creates ample scope for further disagreement and pushback.”

“One issue is that no formal records exist of the various ‘agreements,’ ” Hodges and colleagues write, pointing to earlier US deals. “Japan is already disputing Trump’s description of the deal: the EU deal is similarly high-level. And China has used its rare earth dominance to push back on the proposed 145% tariffs. Longer-term, interest is growing in forming a EU/UK/Canada/Japan grouping.”