Welcome to The Chemical Show, the podcast where Chemical means business.
I'm your host, Victoria Meyer, bringing you stories and insights
from leaders driving innovation and growth across the chemical industry.
Each week we explore key trends, real world challenges, and the
strategies that make an impact.
Let's get started.
Victoria: Welcome back to The Chemical Show Where Chemical Means business.
Today we are focusing on tariffs.
Talking about the current state of play and what chemical
leaders should be expecting.
So as you guys already know, 2025 has been a roller coaster.
I think we thought maybe that it was gonna be a little bit better than prior years.
Who knows?
However, I.
There's been a lot of movement both at the administrative levels and we've
looked at what's going on in the US but also globally, with executive orders,
shifting, agency positions, continued geopolitical movement and shifts.
And currently we seem to be in a state of tariffs on.
Everything.
Although at the time that we're recording this here at the end of April, we're
in a 90 day stay on most of the tariffs.
And and my guests today are gonna talk a little bit more
about that, and what that means.
Obviously as chemical leaders, you know that we're living in a global market.
There's a lot of influence, tariffs.
And shipping and supply chains all have significant influences on the market.
So we're gonna talk about that and more.
Today I've got Joseph Chang, who is the global editor of ICIS,
chemical Business and Al Greenwood, who's the Deputy News Editor.
So these guys report on the trends in the chemical industry analyzing drivers
of the chemical prices worldwide.
Looking at feedstocks and price development, supply demand,
project activity m and a and more.
Oh, and the and more.
Today is tariffs.
So Joe and Al, welcome to the Chemical Show.
Joe: Thank you.
Thank.
Thank you Victoria.
Victoria: Yeah, so let's just start with your origin stories.
'cause how did you get engaged and start writing on chemical
news and chemical markets?
Joe, I'm gonna start with you.
Joe: I started, um, with a, a publication called Chemical Market Reporter.
That was eventually bought out by Rex Rex, our current company.
Uh, it was re Elsevier at the time, but yeah, I started in 1997, I believe.
So 28 years ago I saw an ad in the paper it said financial editor
wanted, and that's, I graduated with a finance degree from NYU and I.
And I was like, oh, I can always write.
So this seemed very intriguing.
I had no idea it was a chemical publication.
They gave me the job on the spot.
They said you could start right away.
I said, alright, let's, let's, let's give it a shot.
And you really learned on the job.
But that was, uh, 28 years ago.
And, uh, yeah, we've been through so many cycles and, and developments.
It's, it's been an exciting ride so far.
Victoria: Yeah.
That's wild.
And did you think that you would use your finance degree to report on this?
Is this where you anticipated going?
Joe: Oh, I don't think anyone thought that they would end up in a chemical magazine.
Yeah.
But, it did prove very useful, especially going through earnings
reports, talking to executives about m and a, financial strategy.
It, it is, uh, yeah.
So it's been very, very, uh, very useful and I'm glad I could put it
to use and actually be able to, use that part, uh, to, to, to bring
readers, a better picture of what's going on in the financial markets.
Got it.
Al: I
Victoria: love it.
Al: Al, how about you?
Well, I actually started, uh, with a, uh, chemistry background in college.
I, uh, initially majored in biochemistry, loved reading about chemistry,
but I kept dropping glassware.
So I thought, you know, if I like reading about chemistry, switched to journalism,
become a, uh, reporter or an edit, you know, science, journals, go back route.
But got ink in my blood, became a newspaper reporter.
So that stuck for about 10 years.
Then in 2007 the opportunity opened at ICIS, so was finally
able to put the two together.
So that's what I've been doing since.
That's very cool.
Victoria: Very, very cool.
And let's talk really briefly about ICIS, chemical business.
So I'm, people may not be fully aware of that, so can you guys just talk about
what you do and what the publication is?
Joe: Sure.
So ICIS chemical business, so weekly, it's a weekly magazine, digital
magazine, gets published every Friday at the end of the week, and it covers
all the major developments that, that are happening in the chemical sector.
And it's part of ICIS news, so the broader news offering.
so we kind of, uh, aggregate, the important development.
So I'm also part of the new team and we, we.
Report regularly, online.
Victoria: Awesome.
Cool.
And I know, uh, you guys, you and some of your other colleagues, not
necessarily in the news business, provide a lot of, content both on LinkedIn
and on your website and elsewhere.
I think people, can see you and in fact, Joe and Al, I, you know,
when we got introduced I was like, I didn't know you, but I'm like,
but I've seen your name everywhere.
So it's nice to, to get names and faces and voices all put together.
so let's just talk tariffs.
What the heck is the current state and how did we get here?
Al: Trump has been talking about, uh, tariffs throughout his, campaign.
It's been a, key part of his economic policy to, bring back manufacturing.
Spring to the United States, reduced the, goods deficit.
So during his campaign, he talked about reciprocal tariffs.
He talked about, uh, baseline tariffs.
So that's what he com campaigned on.
That's what we're getting.
Uh, so there's.
If you followed his campaign, there's no surprises.
I guess it's just how quickly and the magnitude, we weren't expecting
145% tariffs on Chinese imports.
Yeah.
Victoria: And, and these are, and when we look at what's going on, these are
re quote unquote reciprocal tariffs.
Which, you know, I've seen a bit about how they were calculated.
You know, was it a scientific calculation?
I don't know.
I mean, what are you guys seeing and hearing?
So,
Joe: yeah.
It's, it's called the reciprocal tariffs, but in no way, you know,
if you look at this, in no way are these reciprocal at all.
They're not based on, on the tariff levels of other countries or even the,
the non tariff, barriers that the US Trade representative was analyzing.
yeah, it is a US trade deficit divided by the uS imports
from that particular country.
You took that, that percentage and you just divided it by half.
And you, that's how you came up with customized levels on the country,
uh, with the baseline of 10%.
So 10% is the minimum.
And as you mentioned, Victoria, we do have this, 98 pause
that started, uh, in early.
that brings everyone to the baseline of 10%, with the exception
of China, which is at 145%.
And also there are some exemptions for, uh, Mexico and Canada.
Victoria: Yeah.
So everybody's at 10% chi except for China at one 145%, which feels a little crazy.
What have you guys been seeing as the response to this?
Both, I guess, inside the chemical industry, but when we look more broadly,
at what's going on around the globe?
Al: right.
Well, we've seen, uh, globally, prices fall.
Uh, part of that is because of the decline in oil prices.
Chemical prices tend to rise and fall with oil.
We've seen oil decline on the one hand, expectations of OPEC
plus increasing production.
Two oil prices are declining because there are concerns about demand.
Uh, so when you, whatever the reasons for oil prices declining
when they fall, chemical prices fall.
But in addition, uh, these, massive tariffs that the US and China have imposed
on each other, they act as embargoes.
So all of the, uh, chemicals.
More importantly, the end products, that the US and China once exported to each
other, those have to be redirected.
So especially in Asia, we're seeing, uh, Asian, producers,
being flooded with supply.
So that's, contributing to, price declines.
And we're also seeing that in Europe, in the United States, we've seen some.
Initial, declines for our, building block chemicals, but
we're waiting to see if we're going to start seeing price increases.
RPM International held its, earnings call right after, April 2nd.
The tariff announcements, it's preparing for price increases.
In addition, polyethylene terif phthalate.
PET producers have been pushing for price increases because their, catalyst
antimony, China is restricting shipments.
, so that's caused antimony prices to increase.
So the producers are pushing for higher prices to offset those cost increases.
What remains to be seen is.
Whether us producers, pricing power to raise price, uh, we're gonna have
to look, but there's talks about that in the United States and the
rest of the world falling prices.
Joe: If I can just add, yeah, the US is pretty self-sufficient in olefins and
derivatives, so you know, there's not gonna be that much of an impact there.
And if you look at the, the China trade, it's mostly outbound in terms of us, uh,
ethylene and derivatives in particular.
But, , on the import side, you, the US imports a lot of aromatics.
Uh, specifically from South Korea, again, you have that 10%, tariff there, uh,
universal tariff, but, uh, the initial tariff level on South Korea was 25%.
Uh, the US also imports aromatics from the eu and they, which had a 20%
tariff before that was, lower during the pause and specifically one big
impact on the US market, uh, is on MDI.
So MDI is, that goes into polyurethane.
So the US imported more than 50% of its imports of MDI were from China, but I.
Obviously with 145% tariff, tho those shipments have been cut to zero.
So that, that is certainly gonna impact, the MDI market in particular.
But, uh, the real risk to the US chemical industry is for
exports, exports of chemicals.
The US chemical sector is, uh, has a trade surplus of over $30
billion, with the rest of the world.
And.
Very exposed to retaliatory tariffs.
So we're, we're seeing that, uh, from China, US exports quite a
bit of polyethylene to China.
That is under, under 125%, tariffs.
So this is gonna be, uh, very difficult.
All these trade flows, as Al mentioned, they're gonna have to shift.
And you do see product being redirected to Southeast Asia.
Victoria: I think a couple points on that.
Number one, I.
Uh, you know, I think it's hard to, given the, the amount of construction,
that China has had, certainly in some of the polymer products, it's
hard to imagine that they're still importing that much polyethylene.
On the other hand, we also know that the US built a lot of its most recent
developments for and export market.
Do you guys see, I, you know, I think we saw earlier in the 2020s
a bit of a shimmying and shifting.
So instead of, you know, when tariffs come, instead of product going,
let's just use China, for example, going back and forth directly between
China, it'll get redirected to another route and then eventually making
its way into the US or elsewhere.
Do you see that happening again?
Are we, Gearing up for a redirecting where trade routes just simply start
shifting in order to avoid tariffs, is that, is that what's gonna happen?
Is that doable?
Al: Which for me short answer is yes.
We're already, uh, seeing it because we're seeing China redirecting, especially
the end products, to Southeast Asia.
We've had, auto producers, tell our, pricing editors in Asia that.
They're, seeing an influx of Chinese exports that would,
normally go to the United States, now going to Southeast Asia.
So we are, uh, seeing supply chains, being rearranged.
And of course, US producers are going to have to look at their own supply chains.
To see, if they could find another supplier.
Again, think about that antimony, what other, products could
become, susceptible to tariffs?
And also can they find substitutes?
So we're going to see, supply chains, rearrange, we're gonna see,
product substitution when possible and if those fail, if they have
the pricing power, higher prices.
But yes, we're going to definitely see, supply chains rearrange.
We're already seeing it have, yeah.
Victoria: What effect does this have on Europe?
You know, so I think about Europe.
Over the past few years and, and just let's take the last, you know,
12 to 18 months, we're seeing, lots of reports of assets shutting down.
They're of course, under a certain amount of, or have been under some distress
because of this compression between both their sustainability policies.
And carbon reduction goals and policies that have been put in place as well
as, just sheer economics, right?
Older assets, perhaps less economical energies.
Had a, had a role to play, in the economics there.
And, you know, what do you, how does this tariff situation, how
does this reshuffling affect that?
Or maybe what some of those other decisions that have already been made.
Joe: Yeah, Victoria, it's really interesting.
I mean, Europe is undergoing a massive restructuring and we, you
know, as you mentioned, we have seen a massive amount of shutdowns.
Yeah, shutdowns announced.
Shutdowns, even product reviews, asset reviews, this is, uh, due to competitive
pressures that are coming, not just from the US but the Middle East and China.
A lot of, uh, a lot of cheap capacity and product coming on.
But, uh, yeah, the tariffs do make things more difficult and much
more difficult because, especially for the end products that, Europe
manufacturers and sends over to the us, and including some chemicals as well.
This, this will pressure, European industry even more, and also,
yeah, the, the same for the trade flows from the US to, to Europe,
if those are put under tariff.
And the, the EU has already already rolled out, a number of potential tariffs.
So they put that on a ni 90 day pause as the US brought down their,
tariff levels to that 10% baseline.
So we'll have to see what happens, but this can only make things more difficult
Overall, you're seeing an impact on economic growth, lower economic growth.
Expected, not just in the us but you're gonna see this all over
the world, most likely with this, uh, with this kind of trade war.
Yeah.
That's developing.
And that's only gonna pressure the European chemical industry more.
I guess the only positive side is that, governments are
spending more on infrastructure.
They're, they've, uh, committed to spend more on infrastructure and defense
because, they're really not looking to the us, uh, to, to provide that, uh,
the defense level, and they have to be more resilient and self-sufficient.
So that's one.
Kind of positive thing on the growth side for Europe.
Victoria: Yeah, absolutely.
Part of the tariff story, certainly in the US is this idea that we bring
more manufacturing into the us, which.
You know, you and I both know it is not that easy, right?
Expanding a plant can be simple, but it still takes a year or two, or
perhaps more depending on what it is.
Building a new site, um, is much more expensive.
But I, I think about this investment, whether it's in, as you mentioned,
Joe Europe on, some of their infrastructure investment, us and
elsewhere on manufacturing investment.
Realistically, how long does that take before we start really
seeing that spend take place?
'cause policy as easy spend is more difficult.
Joe: Yeah.
And I think spending is even more difficult when you don't know where
policy is gonna end up or you, you have such uncertainty even on those,
the, the tariffs and the 90 day pause and you know, hey, you know, do I
decide to build a plant in the us?
Uh, which, you know, I'm gonna assume there's gonna be.
Major protective barriers are the, the tariffs in place.
And then, oh, what if policies change?
What if, okay, maybe they strike a deal with some of these countries and, uh,
yeah, it's, the tariff is no longer there.
Is it still worth to build in the, you know, in this kind of, uh, environment,
uh, we're seeing companies kind of pull back, pull back on investments,
on decisions in terms of m and a.
Hiring across all businesses.
This is very, very difficult purchasing decisions.
It's really impacting everything and really, um, yeah.
It's hard to make these, these big.
Investments.
Yeah.
And decisions when, uh, the environment is so uncertain in terms of trade policy
and, even the macroeconomic picture, which is related to tariffs as well.
Al: Yeah.
I needed to throw in, uh, in regards to, chemical production moving to the
United States specifically, benzene.
Benzene is a byproduct.
It's a byproduct of cracking nafta.
It's a byproduct of refining.
Nobody is going to increase, refining capacity just to make more benzene.
Nobody in the United States is gonna start cracking more nafta.
Ethane propane is just too, cost competitive.
So no matter how high the tariffs get, nobody's building more
benzene in the United States.
So it's not going to happen.
If the tariffs stay high, it's, you know, producers are gonna have to eat the cost.
Victoria: Well, and, and we talked, previously about
just the effect of energy.
So energy and kind of feedstock components as it relates to,
uh, to the chemical industry.
Right?
So propane and LPG, right?
So US is a huge exporter of that to China and elsewhere, right?
Ethane, those things are starting to shift.
Can you talk more about that al?
Al: Uh, yes.
I mean, we're already, the ethane that the United States,
produces and exports to China.
China is not going to, be able to competitively crack ethane with
these tariffs that ethane can't move to another part of the world.
It has to stay in the United States.
So what we're going to see on.
The ethane side is, the US is gonna have to either put it in
storage, increase ethane rejection.
That's about it.
Uh, so we're going to see, we could see ethane prices reach a fuel
level, fuel value, excuse me.
In other words, ethane will cost about as much as how much, what
its fuel value would be to burn it.
Uh, L PT is a little bit, is that good for chemical
Victoria: producer?
Sorry, I'm gonna go, I'm gonna jump back on that.
Al.
Is it gonna be a good news, bad news that Ethane's gonna be so cheap?
Al: Well, it would be, that would be one good thing for chemical
producers, because when ethane is cheap, that's gonna help their margins.
But I think they would much rather.
See the demand equation increase instead of the, uh, cost equation.
If they could one or the other, but yeah, exactly.
You are going to see that would be allowed chemical producers at ethylene
producers, to increase their margins.
Uh, OPG is a little bit different because we're not the only exporter.
So there could be some.
Rearrangements, in other words, us to China perhaps.
Would see, uh, qar, uh, I believe big LLPG exporter will see a QAR
replace the United States, US replace some of the, uh, Qatari, customers.
So there'll be some rearrangements, but nonetheless, um, we are going
to see, utilization rates fall for the PDH plants in China.
We're gonna see, OPG prices fall with the United States.
Our dock space for our terminals is already filled.
We've gotta get rid of this LPG.
We're expecting, LPG prices, to also fall.
But, certainly what that thing, we're going to see a, price drop
unless, there one, the, uh, Chinese crackers can get an exemption.
Two, there's some things, they can do with some swaps.
Um, I think if they, import the ethane export, uh, Joe's more familiar with
this, uh, export the, derivatives, they might be able to avoid the tariffs, but.
That's about all they have to move around this.
bottom line is NGL prices are going to fall because of these tariffs.
Joe: Yeah, and, and I'll just add that it's not just in the
US but already we're seeing the impact in South Korea and Japan.
So some of these US LPG cargoes that we're.
Going to China, they've been redirected and that has had, quite
a bit of an impact on the markets in, in South Korea, Japan, with
those prices, falling pretty sharply.
So we've seen that already in the past, uh, week or so.
Victoria: here's a question, do you think individual consumers are really
starting to see the effect of tariffs.
Yet, or how and when.
And I guess I would say both from a US perspective, but also
a global perspective, what do you guys see from where you sit?
Joe: I think it may take a bit of time for, for that impact to, to
be seen because, uh, you've seen a front running of purchases.
So, so a number of companies, they've already, built up inventory, anticipation
of tariffs and even consumers have gone out and bought certain goods.
And you see that in the automotive sector where I think
the light vehicle sales have.
gone up shot up to about over 17 million, units on an annualized
basis for the, for the last month.
So, you know, yeah, the, these purchases are happening by
companies, by, individuals already front loading purchases.
I think by the summertime you could see a real, uh, impact, on that
and potentially on prices as well.
But it's, it's, it's also kind of a push and pull where, of course, tariffs do,
do raise costs, and these importers, they'll try to pass along the cost to.
But at the same time, if you get a real slowdown in economic activity, a
real decline in consumer confidence, it's gonna be very difficult to
push through major price increases.
And, and you know, so far we've seen a deflationary impact, again, it,
yeah, you may, it may take time to, for consumers to really feel the,
feel the pinch, uh, of the tariffs.
Victoria: Yeah.
And it also depends, and, and I've had this.
Conversation just on a, personally with some, some folks around, how deep
the margins are on certain products.
Like, you know, when, the tariffs got announced on Vietnam, were at.
I don't know.
I wanna, let's just pick the number a hundred percent.
I know that's not the right number, but it was, oh, it was
Joe: 47%.
Yeah.
There we go.
Victoria: 47%.
Thank you.
Somebody knows the number.
And you know, Hey, is this gonna affect my shoes?
Because, you know, Nike, others get a lot of shoes from there.
I'm like, there is so much stinking margin on those shoes.
It shouldn't affect your shoe price.
Now that doesn't mean retailers won't try to pass it on, but.
I think there's this whole disconnect.
The margins obviously across the chemical value chain are thinner because
those are raw materials getting used into production for other things.
But, um, I guess that's just one of the complicating factors is where in
the system these products come and go.
Joe: Yeah, and you can almost think of it as, okay, it's gonna be a shared
cost between the, even the producer that sends it over there, there's
gonna be some negotiation, the importer itself and the consumer.
So it's almost a, if you think about a third, a third, a third, uh, there's
gonna be some shared, shared pain there.
But say, because the product comes from Vietnam, it's a under.
A 47% tariff that if that particular number is reinstated,
does the product actually go up by 47%, uh, at the retail level?
Uh, absolutely not,
Victoria: right?
Joe: No.
No.
you have to eat some of that margin or a lot of it.
Victoria: so we're sitting here in this waiting period, 90 days now down
to, I don't know, 70 days or whatever.
I'm not sure what our timeline is.
Well, actually, so two things.
Number one, what is the end of that 90 day period?
So what do you guys probably know is the answer?
Al: Uh, 90 days, I think.
Uh, April, may, sometime in
Victoria: end of June, right?
Summertime.
we know who we're asking to do our calendar math from here on out, so.
So I guess while we're in this waiting period, what can and should chemical
companies and others be doing to prepare?
Al: Well, I'll, uh, jump in.
One they've got, uh, I guess covid all over again.
Look at your supply chains.
In other words, which products are you, getting from Vietnam?
Which products are you getting from, lower tariffs, countries.
And, see where is the, most advantageous, supplier with the tariffs.
Uh, and also look at, product substitution.
Uh, perhaps, one product that you got from, one supplier is.
No longer competitive.
Is there a way to substitute it and, also look at your, supply
chains for your end products, because those are a little murkier.
So just like what we saw in, Vietnam with these, uh, influx of, Chinese
material, coming in and products that normally would go to the United States.
All of a sudden, you're getting those end products into Vietnam, and
that's affecting, the, uh, domestic producers of those end products.
They're purchasing, fewer chemicals from Vietnamese producers.
So you have to be, cognizant not just of your, supplies, but also your products.
Which products could be affected by, uh, influx.
Of, displaced, uh, shipments.
Yeah.
And then, , finally look at some of arcane feedstocks, catalysts, additives.
Things you don't really notice are missing until they're gone, because
that's what happened with antimony.
And we've seen this over the years with natural disasters.
When, for example, I think there was a, plant that blew up in
Germany that, produced a, uh, feedstock for like a nylon 12.
I think it was like one of the very few plants in the world So this one chemical
caused outsized effects on supply chain.
So that's something else to be, cognizant of.
And then finally, the self-help that companies have been doing the past 18
months in this manufacturing downturn.
So optimization, cost cutting, efficiency, et cetera.
Victoria: Joe, from your perspective, what do you see?
What are you seeing that companies can and should be doing?
I.
Joe: Well, I think, yeah, as Al mentioned before, uh, I think companies will
look at all their sources of supply and which countries, they come from.
So I'll just give an example for benzene.
Benzene is a big US import.
Uh, the US uses it to, for all sorts of, purposes, but also
to make, tying to, to export.
But US gets a lot as mentioned from South Korea, South Korea.
And again, if that 25% tariff, , goes into place currently it's 10%,
that's gonna be a problem.
So, where else can the.
The US get their benzene.
Uh, well from the eu, EU I think is another big source, but that could be
under a 24, 20% tariff as initially.
put in.
So you look at some of the other sources.
So if you look at the other regions, India, Saudi Arabia, Brazil,
there are also sources there.
Uh, and, and that was originally under a 10% tariff, not, you know, now
everyone is at that universal level, but they were under much lower tariffs.
So you would go.
Potentially to see if there's additional supply from those, uh, from producers
in the, in, in those areas, to try to get, but yeah, I mean, companies have
been scenario planning, before tariffs for, for quite some time, quite some time
since the Trump, presidency and since.
Since he was elected.
But I think in this, it's just gotten so much more complicated with
the different levels of reciprocal tariffs, with the pauses, the sectoral,
tariffs, all sorts of things.
So, uh, yeah, it's becoming much more complicated, but companies just have to
go through all their scenarios in terms of supply chain, sources of supply, and, uh,
as well as, other end markets as well.
Victoria: Yeah, I think it's a great point.
And I think you say, you know, companies have been doing scenario planning
and when I talk to some leaders, they're like, oh, I planned for this.
I just didn't plan for this order of magnitude.
Yeah.
And so that there's a new level of complexity, , as a result.
Joe, I'm gonna, you know, one of the things you talked about is, you know,
as you call it, the arcane products or the products you don't think about.
Part of this is this whole.
Supply chain mapping and understanding, you know, in every product, chemical
products elsewhere, you think that your supply chain is diversified.
Oh, I've got three suppliers.
Oh.
But they're all going to the same original supplier.
And that's where companies get burned a little bit because they think
that they've, created security supply because they're buying
from three different companies.
But as it turns out.
Those three different companies may be relying on a single, uh, source point.
So that whole aspect of knowing your value chain, understanding where
the implications really are, and working your way around it is critical
So what have I not asked you guys that we should be talking about as it relates
to tariffs, craziness going on in our current chemical markets and more?
Joe: another part of this is the impact on the end markets.
And in particular, you look at housing, housing and automotive.
Those are two key end markets for the, for the chemical sector and both, uh,
yeah, very much impacted by, by tariffs.
And the impact on interest rates as well.
So if you look at the housing center sector, you are going
to see a lease signaled by the.
Administration, uh, sectoral, tariffs on lumber.
Lumber is one of the components there.
You already have 25% tariffs on steel and aluminum.
That's bringing up, uh, housing costs, already.
And affordability is, is is very much an issue here with
the, and the interest rates.
Interest rates have actually gone up.
They, they've gone up in the past, uh, several weeks, quite rapidly.
So this is, uh, putting additional pressure on home buyers and, and just
overall the, this, that sector will.
Likely continue to be under pressure, and that's gonna, that's gonna
pressure chemical demand in turn.
And, and same for automotive.
Automotive, you have a series of, uh, tariffs as well on,
on foreign made vehicles.
as well as some of the components, automotive parts as well as
of course, steel and aluminum.
Big input costs.
Yeah, if you increase the.
The price of a vehicle.
If automakers have to increase prices, uh, that's gonna automatically reduce demand.
Reduces demand.
You're gonna have a, uh, another knock on effect for chemicals.
So those two key end markets are very, very much affected by, by tariffs.
And they were already struggling before all of this.
And just, you know, for two years, over two years, we've had kind of an
industrial or manufacturing recession.
And you know, part of that is the weak housing market.
And automotive has been, uh, kind of lackluster, but.
This could potentially get exacerbated with, with the tariffs.
And again, we'll have to see what happens after this, 90 or now it's
a, yeah, less than 80 day pause.
But, uh, those are two key sectors to watch.
Victoria: you know, we already talked about people starting to.
I dunno, stocking up maybe is a strong word, but certainly, um, moving
some purchase or purchase orders ahead to try to moderate with this.
Do you anticipate this whipsaw that we saw in, was it 2022 and 2023?
Right, so there was major stocking and then destocking.
Have we gotten smarter about that?
Do you think
Joe: Yeah.
You know, Al was mentioning the Covid, the Covid factor before, and how companies
really, you know, they, they started double ordering, triple ordering, and you
saw the retail inventories really go up.
Yeah.
As 2022, I think the second quarter of 2022, you saw extremely high levels
of inventories at the retail levels.
So the big box retailers, the Walmarts, the Home Depots, the targets, yeah.
Tremendous increases.
And then.
You knew this was gonna re unwind.
This is gonna, you know, unwind and it was gonna go all the way back to chemicals.
Chemicals and manufacturing and that.
And certainly we saw a massive destocking, not just in, in retail
inventories, but that went all the way down to chemicals, throughout 2023,
all of 2023, even some effects in 2024.
Uh, a really difficult period that was exacerbated by Destocking.
So, you know what, what's gonna happen this time?
You're seeing the same type of effects where the inventory builds.
Ahead of the tariffs, ahead of the tariffs.
Um, you know, companies are trying to make the best calculation of
what future demand is gonna be, but, you know, how do you do that?
In this type of scenario?
It's, I think it's very difficult.
You're gonna have some level of higher inventory, some level
of risk associated with that.
You'd like to think, oh, they learned their lesson from the
last time, you know, during covid.
But yeah, you'll have a similar but a different circumstance here and, uh.
Yeah, we'll, we'll see.
We'll, we'll see what happens, but I don't, I don't think you can completely
mitigate that risk just because, oh, this is what happened during, during Covid.
So yeah, you run the risk of, again, a demand slowdown
potentially emerging in the summer.
If, these inventories have been built up, if consumers have done
some of their pre-buying, uh, yeah, it could get a real malaise by
the time summertime rolls around.
Victoria: Good times guys.
Good times.
You guys are the bears of good tidings today.
It sounds like the messenger.
So messengers.
So, you know, as we, as we wrap, this has been a great conversation.
I really appreciate it.
Is, is there anything that we should be watching, any key indicators,
anything you would say to people like, you know, keep your eyes focused on
this as we go forward over the next three months, six months and beyond.
Al: I've been looking at the, uh, yield on the, tenure treasury note, because
that is, you know, we were expecting it, to fall as the, tariffs are introduced
and we're seeing the opposite effect.
So that is going to.
Extend, some of the paint that we've seen with the, slowdown and durable
goods, slowdown in automobiles, slowdown in the housing market,
because, at least for, mortgages,
if those rise and fall with those, uh, longer term, debt.
So the fact that it's going up is not good for the chemical industry
because that played a big role in the, uh, in that, manufacturing
recession, uh, that Joe mentioned.
So that's, one thing.
The other thing is of course, what we talked about.
Restocking.
We saw automobile sales pick up, right before the, tariffs.
So that's something else to look out for is, how big of a pre-buy splurge
did we see and how will that play out?
And then finally, looking at some of the forward looking, statistics.
The p.
I to see going to, see weaker demand offset the ability for companies to
raise prices to offset the higher costs caused by the, uh, tariffs.
Because at the end of the day, buyers, consumers, customers really
don't care what your costs are.
If there's no demand, they're not gonna buy what you're trying to sell.
Victoria: Well, that's helpful.
Well, Joe and Al, thank you so much for joining me today.
This has been a great conversation.
Joe: Thank you so much, Victoria.
Hey, well
Victoria: thank you.
Thank you.
And thank you everyone for joining us today.
Keep listening, keep following, keep sharing, and we will
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