ICIS: Chemical Industry Braces for Regulatory Shifts and Trade Tensions in 2025

The chemical industry faces a watershed year in 2025 as potential regulatory rollbacks, trade policy changes, and evolving manufacturing patterns reshape the sector's landscape. Al Greenwood, deputy editor and chemicals expert at commodity intelligence provider ICIS, provides insights on how a new administration could impact everything from environmental justice initiatives to electric vehicle (EV) mandates, while highlighting the industry's vulnerabilities to proposed tariffs and the emerging role of regional manufacturing hubs.

How do you expect chemical regulations to evolve under the new administration? What potential regulatory rollbacks or new policies could most significantly impact the industry?

AG: At the least, the pace of new regulations should slow down under Trump. This is what happened during his first term, and I expect it will happen again in his second.

For both terms, Trump had pledged to eliminate two regulations for every new one created.  

I don't know what Trump could successfully roll back, but I do have a list of areas that I will be watching:

1. The federal government's emphasis on environmental justice. In April 2023, Biden signed an executive order embedding environmental justice into federal agencies. 

But even before Biden's order, environmental justice has made it more difficult for chemical companies to expand capacity in the U.S. Environmental justice formed the rationale behind a Louisiana state court voiding the permits that Formosa Plastics Group needed to build its Sunshine project. Even though Formosa successfully appealed the decision of the lower court, it still delayed the project, and its timeline is unclear. 

2. The whole chemical approach that the EPA adopted under Biden in determining whether a substance poses an unreasonable risk under the Toxic Substances Control Act (TSCA). Under such an approach, it was much easier to declare that a substance posed an unreasonable risk during TSCA reviews. 

The EPA may also stop considering environmental justice and plastic waste during its TSCA reviews. The agency announced it was taking such an expansive approach in December 2023. 

3. Trump campaigned on "canceling the electric vehicle mandate," but I don't know how much luck his administration will have in rolling back the regulations introduced by Biden. These were not mandates, but they were so strict that they functioned as effective EV programs. 

The first was the recent tailpipe rule introduced by the EPA. It gradually restricted the emissions of carbon dioxide from light vehicles. 

The other was the stricter standards introduced by the Department of Transportation for its Corporate Average Fuel Economy program. 

The Inflation Reduction Act offers a tax credit of up to $7,500 to EV buyers. However, the IRA was an act of Congress, so I don't know how Trump could roll this back without the help of Congress. 

The other big EV incentive program is California's Advanced Clean Cars II (ACC II) program. This program requires EVs, fuel cells and plug-in hybrids to make up a growing share of the state's auto sales. 

Before California could adopt the ACC II program, it needed the EPA to grant it a waiver under the Clean Air Act. The EPA granted California that waiver at the end of 2024. 

California's ACC II program is consequential because it allowed 13 other U.S. states and territories to adopt similar programs. The EPA's waiver will allow these other states and territories to start their ACC II programs without any federal approval. 

Most likely, Trump will revoke the waiver. This dispute between state and federal regulatory will probably end up in court. 

Which chemical industry subsectors would be most vulnerable to proposed tariffs, and what strategies could companies employ to mitigate these impacts?

AG: Just about every subsector is vulnerable, either because the U.S. has deficits in some chemistries or because its sizeable exports will be vulnerable to retaliatory tariffs. 

Over the years, producers added excess ethylene capacity with the intention of exporting the derivatives. The U.S. now has surpluses of polyethylene, ethylene glycol, polyvinyl chloride, acetic acid and vinyl acetate monomer as well as polypropylene and methanol. 

These products are vulnerable to retaliatory tariffs because of the magnitude of the US surplus and because the world has a glut of these products. If a country imposes excessive retaliatory tariffs on US exports, they can simply rely on another country to replace U.S. shipments. 

The United States does have deficits in some chemistries, notably benzene, melamine and methyl ethyl ketone. 

In the case of benzene, companies will not build new refineries or naphtha crackers to produce more benzene. Buyers will face higher benzene costs, and those costs will trickle down to chemicals made from benzene.

U.S. refiners rely on catalysts made from rare-earth elements in their fluid catalytic cracking units. Tariffs will increase the costs of the raw materials used to make these catalysts. 

Many alkylation units use hydrofluoric acid as a catalyst. Likewise tariffs on hydrofluoric acid will increase operating costs for alkylation units. 

For fluorochemicals like refrigerants and fluoropolymers like Teflon, all of the feedstock trace back to the mineral fluorspar and its immediate derivative, hydrogen fluoride (aka hydrofluoric acid).

Trump already has proposed tariffs on imports from Mexico, which is, by far, the largest supplier of fluorspar and hydrofluoric acid to the United States. I don't think the U.S. mines any fluorspar. 

Fluorochemicals are used to make refrigerants and blowing agents These include hydrofluoroolefins, the latest generation that are both friendly to the ozone and have low greenhouse gas potential. 

Fluoropolymers are critical for semiconductor fabrication plants because the fabs' tubing and hoses need to be chemically inert. Polyvinylidene fluoride is used to make EV batteries. Fluoropolymers are used to make Nafion and other membranes used in fuel cells and water desalinization plants.

China exports several types of specialty chemicals to the U.S. I don't keep track of these, so I'm unable to produce a list. However, tariffs on these will increase costs for companies that rely on them to make materials.

What role do you see regional manufacturing hubs playing in the chemical industry's future, particularly in light of recent supply chain disruptions and geopolitical tensions?

AG: Regional hubs are already playing a role in the chemical industry by creating sources of demand in what has otherwise been a challenging market. We saw a surge in construction spending for manufacturing plants because of companies reconfiguring supply chains in the face of natural disasters, pandemics and geopolitical tensions. The CHIPS Act, the IRA and the Bipartisan Infrastructure Law also created incentives for more factory construction. 

In January 2024, RPM International highlighted the trend and how it was increasing demand for some of its building materials. 

The increase in manufacturing spending has cooled off, and whether Trump's policies will re-ignite it will depend on the availability and costs of labor and building materials. 

Nonetheless, the surge in manufacturing construction in 2023-2024 will create new sources of demand once these plants start making products made with plastics and chemicals.