Introduction: On April 3, 2025, Trump announced the imposition of “reciprocal tariffs” on global trade partners. In response, China announced corresponding tariff countermeasures, imposing an additional 34% tariff on all imported goods from the United States, based on existing applicable tariff rates. This further escalated the trade friction. For the PVC industry chain, on the one hand, it affects the macro sentiment, and on the other hand, it will exert pressure on the export of PVC flooring products, though the impact on other aspects is currently not significant.

Tariff Background

In the early hours of April 3, 2025, Trump delivered a speech in the White House Rose Garden announcing reciprocal tariffs on global trade partners. The US imposed a 10% base tariff on all imported goods, with additional tariffs on countries with significant trade deficits, high tariff rate differences, and non-tariff barriers in bilateral trade with the US. Among these measures, the tariff on imports from China will be 34%. Adding to this, since February, the US has already imposed two rounds of 10% tariffs on Chinese goods, bringing the total additional tariff to 54%.

Following the US’s announcement, China responded with corresponding countermeasures. On April 4, 2025, the Customs Tariff Commission of the State Council announced that, in accordance with relevant laws such as the Customs Law of the People’s Republic of China, Foreign Trade Law of the People’s Republic of China, and basic principles of international law, and with approval from the State Council, starting at 12:01 PM on April 10, 2025, an additional 34% tariff will be imposed on all goods originating from the US. The details are as follows:

1. An additional 34% tariff will be imposed on all imports from the US, based on the current applicable tariff rate.

2. The current bonded, exemption and reduction tax policies remain unchanged, and no reduction or exemption will apply to the additional tariffs.

3. Goods shipped from the place of origin before 12:01 PM on April 10, 2025, and imported between 12:01 PM on April 10, 2025, and 12:00 AM on May 13, 2025, will not be subject to the additional tariffs outlined in this announcement.

Impact on PVC Downstream Products

2024 Sino-US Trade of Major Products of the PVC Industry Chain

Unit: mt

From the data tracked, PVC powder is the primary product imported from the US within the PVC industry chain. However, the import of PVC powder from the US to China is primarily for feedstock processing, with general trade volume being negligible. Additionally, China’s PVC powder market is currently oversupplied, so the impact on this aspect is relatively minor. The impact of US tariffs on Chinese PVC powder exports is also negligible, as China primarily exports PVC powder to India, Southeast Asia, Central Asia, the Middle East, and Africa.

China’s exports of downstream PVC products to the US are substantial, so the US tariff increase has a greater impact on PVC downstream products, especially PVC flooring products. According to GACC, before 2022, the export of PVC flooring products maintained a growth trend, reaching a peak of 5,726.8kt in 2021, with the US accounting for more than half of the total exports. The growth of PVC flooring product exports was mainly driven by increasing US demand. However, since August 2020, the US imposed a 25% tariff on PVC flooring products from China, leading to a slowdown in the growth of exports to the US. In addition, global economic growth has been declining year by year, resulting in negative growth for PVC flooring product exports in 2022-2023. In 2024, with the increase in exports to Europe, the overall export trend for Chinese PVC flooring products rebounded.

In recent years, the US has consistently raised tariffs on PVC flooring products, leading some Chinese PVC flooring producers to move production to Southeast Asian countries with relatively low tariffs, particularly Vietnam. However, the US’s reciprocal tariff on Vietnam has been raised to 46%, putting pressure on Vietnam’s flooring product exports. This requires attention to future negotiations between the US and Vietnam. As these companies relocate, China’s export share of PVC flooring products to the US has decreased, reducing reliance on the US market. Once the reciprocal tariffs take effect, the tariff on PVC flooring product exports to the US will rise to 79%, further increasing the difficulty of exporting to the US. However, in the long run, the US may still face a supply shortage in flooring products, with the supply gap likely to be filled by countries like China. As China’s PVC flooring industry undergoes adjustments, the negative impact will likely diminish.

Impact of Crude Oil and Related Products on PVC is More About Sentiment and Cost Fluctuations

Around the Qingming Festival, due to the reciprocal tariffs between China and the US, and with Saudi Arabia and its allies starting to increase production, crude oil prices saw a significant drop. The impact of trade tariffs on crude oil prices manifests mainly in two aspects:

1. The increase in tariffs will raise import costs and prices, which, due to the large tariffs, will suppress consumer demand, leading to economic pressures as one of the key economic drivers faces difficulty, thus posing a risk of economic decline.

2. After tariff increases, whether the burden is on upstream or downstream, there will be a reduction in the trade volume, and the reduced circulation of goods, including sea, air, and land transport, will lower demand for oil, exerting downward pressure on oil prices.

The fluctuation in crude oil markets has a certain transmission effect on PVC, as PVC can be produced using either the calcium carbide method or the ethylene method, with ethylene derived from crude oil. In 2024, ethylene-based PVC capacity accounted for 26.61% of total capacity. With 2,000kt/a of ethylene-based PVC capacity planned to be launched in 2025, this share will increase. Despite several intermediate products between crude oil and PVC, PVC is not highly sensitive to crude oil price fluctuations, and the domestic production of ethylene-based PVC is relatively limited. However, as crude oil price volatility expands, its effect on the market sentiment increases, and the PVC market will also be affected by the overall commodity sentiment.

Moreover, some domestic ethylene producers purchase ethane or naphtha. Companies buying ethane have reported short-term increases in production costs, which may pass through to PVC production costs, while those purchasing naphtha have reported a potential decrease in ethylene costs. The fluctuations in ethylene costs vary, and some ethylene-based PVC producers may experience cost volatility, though the overall impact of tariffs on ethane and other goods is relatively small.

Short-Term Macro Sentiment Impact Greater Than Micro Impact on PVC Prices

After the US announced the reciprocal tariffs, major global economies were drawn into the “conflict,” and market fluctuations caused by geopolitical factors are expected to increase, leading to a rise in market risk-aversion sentiment. On April 7, 2025, commodity futures generally fell, and the overall macro sentiment was weak, with PVC futures also declining. Therefore, in the short term, bearish market sentiment still needs to be digested, and PVC powder price fluctuations may intensify. As the macroeconomic negative factors gradually dissipate, the main driver for the PVC powder market will return to its fundamentals. In addition, the worsening external environment will likely push the domestic economy to implement more stabilizing growth policies.

From the perspective of the PVC fundamentals, the PVC powder market is currently in a state of oversupply. After the reciprocal tariffs between China and the US, there is some short-term negative impact on PVC flooring product exports, but China’s decreasing reliance on the US market for PVC flooring exports, coupled with ongoing adjustments in China’s PVC flooring industry, will lead to a diminishing of the negative impacts in the future.

Thus, in conclusion, the reciprocal tariffs between China and the US will have more of an impact on the macro commodity sentiment for the PVC market, with relatively little effect on the fundamentals. The PVC powder market will continue to be driven primarily by its own fundamentals, though it will be influenced by overall commodity sentiment in the short term.