Latin American chemical industry seeks more U.S. tariff exemptions

Latin American countries have also suffered significant impacts in the "reciprocal tariffs" negotiations with the United States. The U.S. has decided to delay by 90 days its plan to impose a 30% tariff on Mexican goods, temporarily sparing Mexico's chemical industry from immediate harm. However, tariff negotiations between Brazil and the U.S. have reached a stalemate. Chemical industry associations from both countries hope that governments will secure more tariff exemptions for businesses in future talks.

In Brazil, the Brazilian Chemical Industry Association (Abiquim) acknowledged the government's emergency support program for companies affected by U.S. import tariffs as commendable, but stressed that bilateral negotiations should expand the exemption list to include more chemical products. André Passos, the association’s executive director, argued that U.S.-Brazil negotiations must focus on “technical and economic” criteria, giving Brazil solid grounds to explain to the U.S. that its trade deficit with the U.S. alone does not justify the imposition of a 50% import tariff on Brazil at the beginning of August.

Recently, the Brazilian government unveiled a BRL 30 billion emergency package, allocating funds from the Export Guarantee Fund (FGE) to provide low-interest loans, along with measures such as adjustments to export credit insurance, extended tax relief, and procurement support, aiming to help affected enterprises weather the tariff impact. Abiquim stated: “We believe this plan positively contributes to maintaining industry competitiveness and employment, while further highlighting the urgency of negotiations with the U.S. to secure tariff exemptions for more sectors. The Brazilian chemical industry directly exports approximately USD 2.5 billion worth of industrial chemical raw materials to the U.S. annually. Beyond direct export losses, the association is deeply concerned about indirect effects on downstream industries such as plastics, footwear, food, and apparel, which are now also eligible for support under the program.”

Previously, Abiquim noted that within Brazil’s USD 2.5 billion in exports to the U.S., 82% are concentrated in products under 50 NCM codes, including basic petrochemicals, organic intermediates, and thermoplastic resins. Among these 50 major product categories, only five remain unaffected by the new tariffs. Abiquim reported that in 2024, exports of these five products to the U.S. reached USD 697 million, while the remaining approximately USD 1.7 billion in exports face an additional 40% tariff, raising their total tariff burden to 50%. The organization emphasized: “The key to expanding the exemption list lies in accelerating direct negotiations between the Brazilian and U.S. governments. Abiquim and the American Chemistry Council (ACC) jointly stress that the U.S.-Brazil economic relationship has long been complementary, with deeply integrated supply chains and over 20 U.S. chemical companies operating in Brazil.”

In Mexico, reactions within the chemical industry to the continued postponement of tariffs between Mexico and the U.S. have been mixed. Some industry players emphasize that market uncertainty persists, and weak underlying demand continues to affect operations.

A Mexican chemical industry source said the latest tariff delay merely postpones trade tensions without resolving the fundamental issues, continuing to undermine market confidence. An industry insider remarked: “This just kicks the can down the road for another 90 days—uncertainty remains. Ultimately, I don’t think the U.S. will actually implement the high tariffs they’ve announced or threatened, but this back-and-forth creates significant uncertainty, and the overall negative impact on markets continues.”

Beyond tariff concerns, the Mexican chemical market remains generally sluggish, with the polypropylene (PP) market facing particularly severe challenges. Weak economic conditions across North America continue to dampen consumer demand. As the U.S. is the primary end-market for Mexican manufacturing, and both countries’ manufacturing sectors are currently in decline—with Mexico’s manufacturing sector having contracted for 12 consecutive months—the outlook remains bleak.

(This concludes the series)