A Fresh Blow to Europe’s Chemical Sector
Europe’s chemical industry, valued at over $767 billion, is facing renewed disruption as US import tariffs intensify global trade uncertainty. The sector, already under strain after the region’s 2022 energy crisis, is now struggling with shrinking demand, rising costs, and reduced customer confidence.
The United States recently imposed import duties of at least 15 percent on goods from the European Union. These tariffs directly impact key industries such as automotive, machinery, and consumer goods, which are major customers of Europe’s chemical producers. As a result, orders are being delayed, revenues are slipping, and growth hopes are fading.
Recovery Undermined After Energy Crisis
The European chemical industry is the bloc’s fourth-largest exporter, behind machinery, automotive, and pharmaceuticals. However, recovery efforts have been slow following Russia’s invasion of Ukraine, which sent energy prices soaring. High gas and electricity costs forced some companies to shut down production sites and cut jobs in recent years.
Executives had hoped for a rebound in 2025. Yet with demand slowing in key sectors and tariffs undermining trade, confidence is eroding. Analysts warn of another prolonged downturn if the situation continues.
Earnings Pressure Builds
Financial forecasts reflect the growing stress. Analysts expect third-quarter earnings of European chemical producers to fall by 5 percent, following a steep 22 percent decline in the previous quarter.
Industry experts note that a toxic mix of tariffs, margin pressure, and strong Asian competition is weighing heavily on producers. Chinese and other Asian chemical suppliers are competing aggressively both within Europe and globally, forcing companies to lower prices.
Industry Leaders Adjust Outlooks
The largest European chemical players, including BASF, Brenntag, and Lanxess, maintain a significant presence in the US market. This partially shields them from direct tariff damage. However, even these giants are grappling with cautious customer behavior and delayed orders.
BASF, the world’s leading chemical producer, cut its full-year outlook in July. The company reported that customers are placing orders only weeks in advance, compared with the usual three to four months, due to uncertainty in the global economy.
Brenntag, a leading distributor, also warned that if trade negotiations between Beijing and Washington fail before the November 10 deadline, Chinese exporters may divert shipments to Europe. Such a move could flood the European market with cheaper products, further eroding margins.
Lanxess, another major player, expressed guarded optimism that demand might stabilize towards the year’s end. However, its leadership admitted that the third quarter would remain challenging due to “terrible uncertainty.”
Dollar Weakness Adds Strain
Another hurdle facing European producers is the weakening US dollar. Many companies report earnings in euros but generate significant revenue in dollars. Currency fluctuations are reducing profitability, compounding difficulties created by weak demand.
Dutch company Akzo Nobel, known for its Dulux paint brand, lowered its profit outlook in July, citing exchange rate challenges alongside sluggish demand. German firm Wacker Chemie also reduced its forecast, pointing to dollar weakness and low orders for its polysilicon products, which are vital for solar cell manufacturing.
Destocking and Market Hesitation
Destocking by customers is another key issue. Many buyers are hesitant to commit to large inventories due to economic uncertainty and volatile pricing. This has forced chemical producers to scale back production and adjust their sales expectations.
Executives say the lack of reliability in trade and customer orders has become a major obstacle. For smaller companies, the challenges are even greater.
For example, Hobum Oleochemicals, a family-owned specialty producer, recently lost a potential US client. The American buyer canceled an order for undercoating materials, which could have significantly boosted Hobum’s sales and offset European automotive weakness.
The company’s chief executive noted that without reliable demand, investments and long-term projects are increasingly difficult to justify.
Global Trade Shifts
The EU exported around €40 billion worth of chemicals to the United States in 2024, up from €38 billion in 2023. Imports from the US were valued at €30 billion. These figures highlight the importance of the transatlantic chemical trade, which is now at risk due to tariffs.
A third of European chemical industry revenues — about €224 billion — come from foreign sales. With such heavy reliance on exports, the sector is highly exposed to shifts in trade policy and global demand.
Investment managers warn that Europe’s position as a major global supplier is changing. In the past, the continent produced and exported large volumes of chemicals worldwide. Looking ahead, Europe may lose that dominant role, with markets shifting toward Asia and North America.
Impact on Automakers and Other Customers
The fallout from tariffs extends beyond chemical producers. Automotive companies, a key sector for chemical demand, are also suffering. Global carmakers have already booked billions in losses due to trade war disruptions.
Chemicals are essential in manufacturing car parts, coatings, plastics, and adhesives. Reduced automotive output directly translates into weaker chemical demand, creating a negative feedback loop for both industries.
Hope for Stabilization
Despite current challenges, some analysts suggest demand could begin stabilizing into 2026. However, much depends on global trade negotiations, energy costs, and the resolution of US tariff policies.
The European chemical sector remains resilient, with large multinational firms able to adapt more easily. Yet smaller companies face existential threats if trade barriers persist and uncertainty continues to deter investment.
Europe’s chemical producers are once again under severe strain, this time from US tariffs that threaten to derail fragile recovery efforts. Combined with high energy costs, weak demand, and volatile currencies, the industry faces a difficult road ahead.
Executives warn that without stability and reliable trade conditions, both large and small companies will struggle to invest, expand, and retain jobs. The outcome of ongoing trade negotiations will be critical in shaping the sector’s future.
