ACC downgrades growth forecast for U.S. chemical industry

Recently, the American Chemistry Council (ACC) stated in analyzing the outlook for the U.S. chemical industry that fluctuating trade policies and unclear end-market demand have significantly impacted the sector. The ACC forecasts that U.S. chemical production (excluding pharmaceuticals) will grow by only 0.3% this year and is expected to contract by 0.2% in 2026. The ACC also projects that U.S. GDP will grow by 1.3% in 2025, far below the 2.7% growth forecast made at the beginning of this year.

The ACC's forecast for the full-year U.S. chemicals outlook indicates that chemical production rose 6% quarter-on-quarter in the first quarter but will weaken over the remainder of the year. "Expectations for the next six months have deteriorated. Given that uncertainty around trade policy has cast a shadow over many chemical end-use markets, chemical demand is also expected to weaken," the ACC said.

Chris Jahn, president and CEO of the ACC, noted that uncertainty surrounding trade policy is undermining confidence among ACC members. "I hear from them that they want to see sustainable demand growth. Some say certain segments may become more active, but they don't believe growth will truly rebound," Jahn said. Martha Moore, chief economist at the ACC, said although pre-tariff stockpiling is not yet clearly evident in inventory data, it might still be too early for such shifts to show up in the numbers. "Some inventory-to-sales ratios are rising, but not sharply." Trade policy is the primary factor behind the worsening chemical industry outlook so far in 2025, with policy uncertainty prevalent across the broader economy.

According to the ACC, both consumer spending and business investment growth in the U.S. are expected to slow this year. Consumer spending is projected to grow 1.9% in 2025, down from 2.8% in 2024, while business investment is expected to rise 1.7% in 2025, compared to 4.0% last year.

ACC data also shows that global industrial production growth is expected to decline slightly this year, falling from 1.7% in 2024 to 1.5%. Moore noted that after years of weak manufacturing, there were signs of recovery at the end of last year and the beginning of this year, but conditions have since changed, with policy uncertainty being the biggest factor.

In its mid-year report, the ACC stated, "Widespread uncertainty about trade policies and their potential impacts is slowing economic activity in the United States and abroad. Due to the lack of clarity, many companies are struggling to make decisions, and orders, investments, and hiring are being delayed as numerous firms adopt a 'wait-and-see' stance." However, trade policy uncertainty is not the only factor dampening demand. Rising interest rates, higher material and labor costs, and tariffs have reduced affordability in housing and automotive end markets. Moore said affordability has become a major issue in both sectors. The ACC expects U.S. light-duty vehicle sales and housing starts to decline year-on-year in 2025.

Nonetheless, some end markets are performing relatively well. The ACC said semiconductor production is expected to grow 7.0% this year, driven primarily by demand for artificial intelligence applications. Additionally, computers, oil and gas, and pharmaceuticals are also expected to achieve strong growth. Chris Jahn said that at the ACC's annual meeting earlier this month, participants expressed concern about the near-term economic outlook. As a result, the ACC has lowered its full-year growth forecasts for most chemical end markets, expecting about half of these markets to experience declining sales this year.

The ACC remains "cautiously optimistic" that uncertainty around trade policy will eventually be resolved. It believes the U.S. has an opportunity to establish appropriate trade relationships with its largest partners and ensure access to raw materials not produced domestically. According to ACC data, U.S. chemical exports are expected to decline by 1.9% this year, while imports are projected to fall by 1.0%. The U.S. has long maintained a chemical trade surplus, and this trend is expected to continue.