In recent weeks, significant uncertainty has been injected into the business landscape, particularly within the chemical distribution industry, due to the new tariffs announced by the Trump administration. These tariffs, which are set to impact Canada and Mexico starting March 4, 2025, have raised concerns about the effect on both domestic and international chemical trade, with a special focus on the U.S.-Canada relationship, which is a critical lifeline for the industry. As business owners and industry leaders navigate the complexities of these tariffs, it is essential to understand the economic ramifications, the uncertainty in implementation, and what steps are being taken to address these challenges.
First and foremost, it’s important to recognize that tariffs, in their essence, are taxes that directly impact the prices of imported goods. The new tariffs announced by President Trump are expected to raise chemical prices by a staggering $18 billion. This increase will not only affect chemical distributors but will also cascade throughout the entire economy. It’s estimated that nearly 5,000 chemical distribution jobs could be at risk, with the broader economic impact potentially leading to the loss of over 22,000 full-time jobs and nearly $1.4 billion in lost wages. These numbers reflect the magnitude of the tariffs’ impact, which will extend far beyond just the chemical sector.
President Trump has also indicated that these tariffs will add significant strain to the economy. The imposition of 25% tariffs on imports from Mexico and Canada, with a lower 10% tariff on Canadian energy products like oil and electricity, is set to create a substantial tax increase. This could cost U.S. consumers between $120 billion to $225 billion annually. With the added complexity of these tariffs being linked to issues like drug trafficking and immigration, the economic consequences are already felt across various sectors.
The tariffs are expected to increase import costs by approximately $15.7 billion, contributing to a shrinkage of the U.S. economy by nearly $4.7 billion. The uncertainty surrounding these tariffs, particularly regarding when they will be implemented and whether exclusions will be granted, makes it extremely difficult for businesses to plan and budget effectively. As ACD President Eric Byer notes, businesses need certainty to make informed decisions, invest resources, and avoid wasting time and money. Unfortunately, with tariffs being used as a negotiation tactic, this certainty remains elusive.
For chemical distributors, the uncertainty about the timing and implementation of these tariffs has posed significant challenges. Although temporary 30-day extensions have provided some relief, industry experts expect that the tariffs could be enforced on March 4, 2025, and distributors need to be prepared. To assist businesses, ACD has committed to providing resources and support. This includes offering webinars with outside legal counsel to help members navigate the complexities of tariff compliance.
However, these resources can only do so much. The real issue lies in the broader uncertainty that businesses face. While ACD can provide guidance and policy advice, the fact remains that tariffs create a volatile business environment where decision-making becomes a guessing game.
One of the most significant concerns regarding the tariffs is their potential to disrupt trade between the United States and Canada, two of the world’s largest chemical trade partners. The U.S. imports over $32 billion worth of chemicals from Canada, while Canada relies on the U.S. for 77% of its chemical exports, which amounts to $28 billion in trade. These chemicals are not just components of industrial manufacturing—they are essential ingredients for various downstream industries, including automotive, food and beverage, and construction.
The imposition of tariffs could significantly affect industries like the automotive sector, which relies on a tightly integrated North American supply chain. For instance, chlorine from Canada is critical for disinfecting drinking water on the West Coast, and disruptions to this supply could create significant public health risks.
The economic uncertainty caused by tariffs is already influencing major investments in the chemical industry. Projects like Dow’s $6.5 billion Path2Zero ethylene cracker in Alberta, Canada, are at risk as companies reconsider their business strategies. Large multinational corporations with operations on both sides of the border are increasingly concerned about the potential for tariffs to alter the economics of their projects.
Greg Moffatt, CEO of the Chemistry Industry Association of Canada, emphasized that companies engaged in North American trade are closely watching these developments. Supply chains are deeply intertwined between the two nations, and even a small disruption could cause long-term consequences. Building new infrastructure to replace lost Canadian supplies would take years, making the task of rerouting chemical production and distribution a daunting one.
Given these challenges, ACD has made it clear that they do not support the new tariffs. While the administration has stated that these tariffs are meant to serve as a bargaining tool to improve U.S. economic prospects, ACD remains concerned about the long-term impact on the chemical industry. As Byer pointed out, businesses simply cannot function effectively without certainty. The organization is actively working with policymakers in Washington to emphasize the detrimental effects of these tariffs on both the industry and the broader economy.
ACD’s advocacy efforts are focused on urging Congress and the White House to take a more measured approach to tariffs, considering their downstream effects on industries that rely on chemical products. While the trade relationships with Canada and Mexico are crucial to the U.S. economy, the ACD believes that working collaboratively with these trading partners would create more sustainable growth and stability for all.
The uncertainty and complexity surrounding the tariffs have put the chemical distribution industry in a precarious position. While the long-term consequences remain unclear, one thing is certain: businesses are navigating through a period of instability and disruption. The ACD’s continued support and advocacy efforts are essential for helping members manage these challenges and plan for an uncertain future. In the meantime, businesses must prepare for the worst while hoping for a resolution that strengthens the supply chain rather than destabilizing it. The coming months will be crucial as the industry continues to assess the full impact of these tariffs.