President Donald Trump has announced a 90-day suspension of reciprocal tariffs applied to all trading partners excluding China, providing a sigh of relief for domestic corporations in the petrochemical sector. The Trump administration has further indicated it will raise tariff barriers against China, leading to forecasts that domestic corporations will benefit from this situation.
On the 9th (local time), President Trump noted through his Truth Social account that "more than 75 countries want to negotiate with the United States over trade issues, tariffs, exchange rate manipulation, and non-tariff barriers, and no retaliatory measures have been taken. Therefore, he decided to defer the imposition of reciprocal tariffs for 90 days."
He added, "Tariffs directed at China will be immediately raised to 125%," stating, "This is based on the judgment that China has shown a lack of respect in the global market."
On the 2nd, Trump had expressed his intention to impose reciprocal tariffs on major countries around the world, with rates of 34% on China, 20% on the European Union (EU), 24% on Japan, 27% on India, and 25% on South Korea.
Concerns about reciprocal tariffs were significant within the domestic petrochemical industry. In recent years, China has supplied petrochemical products at low prices, leading to a substantial deterioration in profitability, and there is growing alarm that reciprocal tariffs could block exports to the United States.
As of 2023, the export ratio of domestic petrochemical corporations by country was highest for China at 36.9%, followed by Vietnam at 11.4% and the United States at 8.9%. While the U.S. accounts for a smaller export proportion than China, it has been viewed as a market from which domestic petrochemical corporations struggling with reduced exports to China could recover their revenue.
Since the outbreak of the Russia-Ukraine war in 2022, China has significantly reduced costs by importing inexpensive Russian crude oil while increasing its production capacity. Consequently, domestic corporations affected by a downturn in exports to China are turning their attention to new markets. In 2020, the export ratio of domestic petrochemical companies to the United States was 5.1%, but it has shown a steady increase since then.
The fact that Vietnam, the second-largest exporter, has escaped the burden of reciprocal tariffs reaching 46% is also seen as a positive factor. Vietnam imports basic petrochemical products from Korea to manufacture finished goods for export to the U.S. If high tariffs from the U.S. had been imposed, it is likely that the demand for Korean petrochemical products in Vietnam would have significantly decreased.
Within the petrochemical industry and the financial market, there are also projections that domestic companies will gain a windfall if the trade conflict between the U.S. and China persists for a long time. In particular, companies that excel in specialty (high-value-added) products are expected to see the U.S.-China conflict as a new opportunity.
A representative specialty item is NB latex, used in materials for medical and industrial gloves. In South Korea, companies like Kumho Petrochemical and LG CHEM manufacture this product and export it to countries like Malaysia.
According to a report published by Hana Financial Group last month, the import ratio of U.S. NB latex gloves from China was 35% in December of last year, but plummeted to 7% in January of this year following the imposition of tariffs. Hana Financial Group analyzed, "With the imposition of reciprocal tariffs, exports of Chinese gloves to the U.S. have become virtually impossible. This will present a positive opportunity for domestic NB latex companies like Kumho Petrochemical."