A trade war is an economic dispute between two countries. It can occur when one country retaliates against another’s perceived unfair trading practices with restrictions, such as tariffs on imports.

US-China Trade War: Key Events and Developments

The US-China trade conflict began in 2018 during President Trump’s first term, driven by the US goal to address what it saw as unfair trade practices and forced technology transfers by China. In response, China accused the US of protectionism and hit back with retaliatory tariffs. Although a phase-one deal was signed in 2020, the agreed targets were never fully achieved.

Under the Biden administration, most of these tariffs were kept in place, with new ones added on strategic products like electric vehicles and solar panels. The situation escalated dramatically in 2025 during Trump’s second term, when the US imposed tariffs as high as 145 per cent on Chinese goods, prompting China to respond with 125 per cent tariffs on US exports. This intense trade war threatens to reduce global merchandise trade by 0.2 per cent, even as both countries continue to negotiate and offer selective exemptions.

On April 9, 2025, the US President signed an Executive Order that overhauled the tariff policy, taking effect the next day. The new policy introduced a flat 10 per cent tariff for most US trading partners—including Mexico, Canada, and others—while imposing a much higher 125 per cent tariff on goods from China, Hong Kong, and Macau, further raising tensions.

However, on May 14, the US softened its approach by temporarily reducing tariffs on Chinese and Hong Kong goods from 145 per cent to 30 per cent for a 90-day period, likely to create room for ongoing talks. China responded by lowering its tariffs on US goods from 125 per cent to 10 per cent. Despite the headline rate of 10 per cent, effective tariffs remain higher depending on the types of goods imported and various exemptions. As of May 20, Canada faces an effective tariff rate of 17.2 per cent, Mexico 14.7 per cent, the Rest of the World averages 11 per cent, while China still bears the highest effective rate at 33.2 per cent.

Chemical Industry as a Key Stakeholder

The chemical industry is particularly vulnerable to tariffs because of its heavy dependence on global supply chains and imported raw materials. Many essential chemicals and intermediates used in US manufacturing are sourced from abroad, so tariffs directly increase the cost of these imports. This puts immediate financial pressure on chemical companies, especially smaller ones that operate on tight margins and cannot easily absorb the added costs. As a result, they may be forced to raise prices, cut production, or shift to more expensive suppliers—all of which can disrupt operations and reduce profitability. Additionally, because the chemical industry supplies core materials to major sectors like pharmaceuticals, electronics, agriculture, and automotive, any cost increases or supply disruptions caused by tariffs quickly ripple through the wider economy.

How US Tariff Reshaped the Chemical Trade

When Washington hit China with waves of Section 301 tariffs, the chemical sector had to face collateral damage. Suddenly, everything from plastic pellets to pharmaceutical ingredients carried hefty 7.5-25 per cent price hikes—costs that rippled through factories, laboratories, and global supply chains.

The Domino Effect

American buyers slashed Chinese chemical imports by nearly 30 per cent, scrambling to source alternatives from Germany, India (up 18 per cent), Mexico (up 12 per cent), and Vietnam (up 25 per cent).

China retaliated by freezing out US chemical exports, leaving container-loads of polyethylene and PVC stranded at docks.

The EU joined the fray, imposing 10-15 per cent tariffs on US ethanol, wiping out $2 billion in American sales.

Major Chemicals Caught in the Crossfire

The trade war hammered products at every stage of production:

Basic Building Blocks: Ethylene, sodium hydroxide, sulphuric acid.

Everyday Plastics: Polyethylene, PVC, polycarbonates.

Specialty Ingredients: Titanium dioxide, adhesives, semiconductor chemicals (photoresists, high-purity gases), which faced 25 per cent tariffs, raising costs for US technology firms.

The Economic Impact on US chemical manufacturers

The US tariffs on 1,500+ chemical products have created both challenges and opportunities. These measures increased production costs by 8-25 per cent for the 20 per cent of raw materials imported from China, while supply chain rerouting added 30-45 days to delivery times. Pharmaceutical manufacturers were particularly affected, with 70 per cent of antibiotic ingredients becoming 8-10 per cent more expensive.

Specialty chemical producers face acute pressure, struggling with higher costs for materials often unavailable at scale domestically. The 16.5 per cent of US chemical imports from China (2023) now require urgent alternatives, forcing companies to balance existing contracts with necessary adaptations.

However, positive trends are emerging. The narrowing import-domestic price gap has spurred reshoring, reflected in a 17 per cent YoY patent increase. Friend-shoring is accelerating too, with EU chemical exports to the US up 9 per cent and India/Mexico filling gaps. While transition costs remain high, these shifts may ultimately build a more resilient, self-sufficient industry.

The Impact of Tariff on Chinese Chemical Manufacturers

The US’s 33.2 per cent effective tariff on Chinese goods has dramatically reshaped global chemical trade flows. With China previously accounting for 16.5 per cent of US chemical imports (2023), American firms are rapidly seeking alternative suppliers, forcing Chinese manufacturers to pivot strategically. This shift has seen China’s chemical exports to the EU and ASEAN grow by 18 per cent, though often at reduced prices that risk creating global oversupply. The semiconductor sector has been particularly impacted, with US-China joint R&D projects plummeting 40 per cent since 2023 (Brookings Institution), demonstrating how tariffs are disrupting technological collaboration alongside trade.

Chinese chemical producers have proven surprisingly resilient, with many able to absorb tariffs up to 50 per cent on US imports. Rather than cutting production, they are aggressively redirecting exports to non-US markets, potentially flooding regions like Southeast Asia, Africa, and India with competitively priced chemicals. This strategy risks triggering price wars that could destabilise local producers worldwide. While China’s 10 per cent tariff on US chemical imports remains manageable, the broader market faces volatility as trade patterns reconfigure. The chemical industry now confronts a new reality where geopolitical tensions are reshaping decades-old supply chains, with both challenges and opportunities emerging across global markets.

Impact of Tariff on Indian Chemical Sector

The US tariff hikes have created a complex scenario for India’s chemical industry, presenting both promising opportunities and formidable challenges. On one hand, the restrictions on Chinese imports have opened doors for Indian manufacturers, particularly in specialty chemicals and pharmaceuticals. The sector has already seen a 15 per cent boost in API exports to the US, while shipments to the EU grew by an impressive 22 per cent—clear signs that global buyers are diversifying their supply chains. Countries like Brazil are emerging as promising new markets, with potential to increase chemical exports from $2 billion to $3.5 billion. Even within the constrained US market, niche segments like polymers and additives are finding new competitive advantages against Chinese alternatives.

However, the situation comes with significant risks that could undermine these gains. The most pressing concern is the potential flood of discounted Chinese chemicals into Indian and other global markets, as Chinese manufacturers redirect their US-bound surplus. Industry projections suggest this could lead to a dramatic $2-7 billion decline in India’s US chemical exports by FY26, with specialty chemicals being particularly vulnerable. Smaller Indian exporters, already operating on thin margins, may struggle to compete with these dumped prices, even as larger firms manage to hold their ground.

Looking ahead, while the government is actively working to strengthen domestic production capabilities, companies must remain nimble to navigate this evolving trade landscape. The path forward requires careful balancing—capitalising on new export opportunities while developing strategies to counter price pressures from redirected Chinese exports. Those who can adapt quickly may find themselves well-positioned in a global market that is being fundamentally reshaped by these trade realignments. The coming years will test the sector’s resilience, but also present unprecedented chances for growth and market expansion.

Saying they cannot afford to wait while trade negotiations unfold, small businesses are calling for relief from US President Donald Trump’s tariffs, warning that surging costs and disrupted supply chains were pushing many companies to the brink of collapse.

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At an event organised Thursday by the US Chamber of Commerce in Washington, small business owners and industry experts urgently sought immediate action as a growing number of US companies – large and small – brace for the disruptive impact of tariffs.

The chamber – the country’s largest trade group, representing nearly 3 million American companies of all sizes – sent a letter to Commerce Secretary Howard Lutnick, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer seeking automatic exclusions for small importers who lack the capital reserves or supply chain flexibility to absorb the tariffs.

It also demanded exclusions for products that cannot be produced in the US or are not readily available domestically and – noting that more than 40 million US jobs depend on trade – a process for companies to apply for relief if tariffs pose “significant risks” to employment.

Trump imposed a cumulative 145 per cent tariff on Chinese imports and a 10 per cent universal tariff on goods from other countries, with some imports from Canada and Mexico facing a 25 per cent duty. Except for China, Trump paused the imposition of the tariffs for 90 days to allow trading partners time to negotiate.

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Trade and his cabinet secretaries claim that trade talks with China are under way, though Beijing has denied any negotiations are taking place.

“The latest wave of tariffs is creating ripple effects across both imports and exports,” Danaf said. (Eric Thayer/Bloomberg)

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The slowdown of U.S. imports due to tariffs is expected to have downstream effects on the rest of the supply chain, including trucking, according to experts.

President Donald Trump has made tariffs a cornerstone of his foreign trade agenda. This included sweeping tariff actions against numerous countries April 2. But much of that was postponed a week later except for a 10% baseline tariff and an especially high rate of 145% on China. The result has been uncertainty, volatile imports and retaliatory tariffs.

“The latest wave of tariffs is creating ripple effects across both imports and exports,” said Mazen Danaf, senior economist at Uber Freight. “We’re observing a slowdown in imports, particularly for non-essential goods. While national truckload volumes remain relatively stable, spot volumes have clearly decreased. More broadly across the industry, some manufacturers are beginning to pause imports and even slow production at certain U.S. facilities.”

Danaf added that some shippers are exploring new sourcing regions or reshoring strategies. But he also pointed out that such shifts take time. He expects continued softness in freight demand in the near term, especially at major coastal ports and intermodal hubs.

“The immediate impact is seen on the [business-to-consumer] sales via the popular e-commerce platforms,” Phani Reddy, assistant vice president of product management at E2open, said in a written response. “With changes to the de minimis provision (also known as section 321 in U.S.), the need for formal entry process has increased.”

Reddy added that the additional tariffs on goods from China resulted in a lot more scrutiny and a spike in brokerage companies working to get shipments across the border. But companies have not yet decided to pass that additional cost to customers, he noted.

“Bilateral trade negotiations in the coming months [are] expected to ease the situation a bit,” Reddy said. “There are short-term ‘re-sourcing’ possibilities expected to minimize the impact of tariffs, that too [are] not expected in weeks, likely months to come.”

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A ship arrives at the Port of Los Angeles. (Eric Thayer/Bloomberg)

TD Cowen reported that port freight volumes fell 30% to 40% on the West Coast in the month since the main round of tariffs. They were also down 10% to 15% on the Gulf and East coasts. This decline followed a surge in demand from earlier efforts to frontload cargo ahead of the tariffs. The financial services firm also recently held a call to discuss the ports with shipping, freight forwarding and drayage executives who said their customers are taking a wait-and-see approach.

“Our panelist believes a signed trade deal soon is unlikely, and a deal needs to be done by the next 30-45 days to avoid supply chain bottlenecks and empty shelves for peak holiday season,” TD Cowen analyst Jason Seidl wrote. “Freight recovery lags by 4-6 weeks of ocean bookings data, which is the key data point to watch for signs of life. Near-term impacts (assuming deals are made in near-term) should be less than COVID.”

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Port of Los Angeles Executive Director Gene Seroka has been making the rounds on different news networks warning about the impacts of tariffs. He even closed out last month warning of a 35% year-over-year decline in volumes for that week based on loadings from Asia.

“For the last few years we’ve seen a lot of companies transition out of China already,” said Glenn Koepke, vice president of enterprise accounts at Vector. “So, the tariffs specific to China and the U.S. trade relations aren’t as significant as an impact as they would’ve been, call it five to 10 years ago.”

Koepke added the U.S. is still very reliant on China for raw materials and other hard goods even with those changes. He has also seen the slowdown in imports, but he largely attributes that to the frontloading efforts bringing much of that cargo in early. He has also seen other companies being willing to risk higher prices later on as they wait for clarity.

“We’re witnessing only the leading edge of tariff disruptions, with ocean freight bookings from China down 60%,” said Shana Wray, principal solutions consultant at FourKites. “Given the 38.5+ day transit times from Asia, the full physical impact is still moving through the system. It is difficult to tell the full effect at this time, as many companies have been actively planning to avoid disruptions to the supply chain, dating back to the disruptions caused by COVID-19.”

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Trucks in line to enter the U.S. at the World Trade Bridge port of entry in Laredo, Texas, in February. (Cheney Orr/Bloomberg)

Wray highlighted how customers have been implementing strategies like nearshoring and diversification since the coronavirus shutdowns. They have since been able to shift production and ramp up exports from countries with lower tariffs. She has also seen that eliminating the de minimis exemptions has resulted in some online platforms pivoting to local fulfillment.

“This creates a fascinating counterbalance where trans-Pacific container volumes plummet while domestic warehousing and regional distribution needs potentially increase as inventory relocates to avoid the tariff wall,” Wray said. “Trucking faces a complex scenario of potentially reduced import volumes alongside demonstrably rising input costs.”

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Wray expressed particular concern over what she views as strategic paralysis rippling through supply chains. She noted that the sheer unpredictability of the current trade environment makes it difficult for businesses to commit to long-term network redesigns.

“Businesses were caught by surprise, by the scope and the scale of the initial announcements of tariffs,” said Jackson Wood, director of industry strategy for global trade intelligence at Descartes. “And then subsequently through April, particularly as it relates to trade with China, the tariffs have been significant, and you have heard a lot of rhetoric of companies talking about pausing shipments, stopping shipments, rerouting shipments.”

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A temporary pause on sky-high tariffs between China and the US isn’t really giving consumers much of a break from trade war chaos.

Five supply chain experts told Business Insider that, even with the recent reduction in Chinese tariffs, they expect to see continued disruption in the supply chain at least through the end of the year.

And, they said, the higher prices consumers are seeing on everything from fast fashion to electronics are probably only going to increase.

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“While tariffs can be enacted with a pen stroke, it takes years to rewire global supply chains,” John Lash, group vice president of product strategy at connected supply chain platform e2open, told Business Insider. “How this all plays out will be a complex formula full of surprises, with the general theme of higher consumer prices.”

President Donald Trump has said that his trade strategy, while it may cause “short-term” pain for American consumers, will lead to more balanced trade relationships with our global partners, reducing or eliminating persistent trade deficits, and strengthening the US manufacturing industry.

Here’s what supply chain experts said about what to expect in the meantime.

The ‘bullwhip effect’

The bullwhip effect is a supply chain term used to describe how small disruptions create larger ripples throughout the chain of consumers, manufacturers, distributors, wholesalers, and retailers. It causes inefficiencies, inventory fluctuations, and price instability.

It’s most often caused by unusual variations in demand, usually stemming from poor forecasting or bulk ordering — both of which the sector is dealing with now.

“We are in the bullwhip effect, but this would be what I call a policy-induced bullwhip effect,” Nick Vyas, the founding director of the University of Southern California Marshall’s Randall R. Kendrick Global Supply Chain Institute, told BI.

Businesses prepared for Trump’s tariffs ahead of his inauguration by frontloading their shipping and stockpiling inventory. Then, when Trump’s aggressive tariff strategy was announced in early April, they started holding shipments back to avoid paying higher fees. Ocean freight bookings to US ports from China decreased dramatically, restocking slowed, and jobs were cut across the shipping sector, Business Insider and other outlets have previously reported.

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Now, Vyas said, we’re in a “90-day refuel” where businesses will try to bring in as much stock as they can before the holiday season — and before the trade tensions have the chance to heat up again at the end of the temporary pause. But don’t expect the supply chain snarls to clear up right away.

“I think this fluctuation, this back-and-forth cycle, the bullwhip is going to last us for at least the foreseeable future,” Vyas said.

Continued shipping disruptions

Following a period of slowed-down activity at the ports, companies are now going to try to bring in as much inventory as they can over the next 90 days “because they don’t know what’ll happen” once the pause runs out, Chris Tang, a University of California, Los Angeles professor and expert in global supply chain management, told BI.

“So the port was empty, but now all of a sudden there’s a big surge coming,” Tang said.

That rush creates a new set of issues that will lead to increased prices, Bob Ferrari, a supply chain executive and managing director of the Ferrari Consulting and Research Group, told BI.

“Now, if this turns out to be as it has in the past, when all this activity comes in at once, then the container shipping lines scramble to handle all that volume in that short period of time,” Ferrari said. That makes container shipping rates go up, raising the overall cost of transporting goods, he said.

Under the 145% tariffs, supply chain experts warned that Americans would see higher prices, empty shelves, and shortages within weeks. And while the lowered tariffs will reduce the extent of those impacts, the new tariffs and increased transportation costs will still lead to higher-than-normal prices, Ferrari said.

“You’re going to see maybe double-digit price increases,” he said.

Already increasing prices

Walmart, the biggest retailer in the US, has already started preparing its clients for continued price hikes. CEO Doug McMillon said in a Thursday earnings call that, though the temporary tariffs deal with China is a great start, it’s not enough to keep prices down.

“Even at the reduced levels, the higher tariffs will result in higher prices,” he said, adding that there needs to be a longer-term agreement between the two countries that lowers the tariffs even further.

Lisa Anderson, a supply chain expert and president of LMA Consulting, told BI she expects the overall effect of the tariffs to be “mildly inflationary,” with some of the worst economic effects tempered by the recent trade deal, but ultimately “each industry or company could have a wildly different outcome.”

But, she said, “over time, I’d expect for prices to stabilize after a near-term bubble.” That’s because “as companies move supply chains to the US, Mexico, India, Latin America, and other countries, they will offset the impacts of tariffs and be able to bring down prices,” she said.

As for what kinds of goods this will affect, John Lash said discretionary products will see price hikes faster than staple items.

“And some goods we are used to buying may no longer be available,” he added.

More trade turmoil on the horizon

Since they were first announced on April 2, Trump’s sweeping tariffs — including a 10% baseline tariff and significantly higher tariffs on certain countries — have roiled the markets, wreaked havoc on the supply chain, and worried global leaders.

Trump’s moves to increase the tariff on China to 145%, pause many country-specific tariffs for 90 days, and exempt certain electronic products from tariffs left business leaders concerned about continued uncertainty in the market.

Now, even after the first major trade talks between the dueling superpowers over the weekend, in which the US and China agreed to significantly lower their tariffs on each other, the uncertainty has persisted, since the US-China deal has another 90-day deadline.

As more tense negotiations creep across the horizon, Tang told BI that companies across the supply chain, which had already suffered a lot of damage following Trump’s “Liberation Day” tariffs announcement, are still scrambling to catch up.

And it’ll continue to be difficult for businesses to prepare for the future when they have no idea what Trump’s next move will be.

“A complete trade deal is very difficult to pinpoint because, right now, I think the announcement is only a blanket statement — they still have to break down the details,” Tang said.

“It’s very important for the US government and work it out with China to have a really stable agreement — one way or the other, either high or low, just stick to it — so at least businesses know what they’re working with,” he said. “They don’t need to be lovely-dovey to each other; you can cooperate and compete at the same time, but that’s what’s most important.”