How Trump's New Tariffs Are Reshaping LPG and Base Oil Trading

ZURICH - Aug. 18, 2025 - PRLog -- Under President Trump's "Liberation Day" program, the United States introduced wide-ranging tariffs and sanctions that are reshaping global energy trade. These measures, including a 10 percent baseline tariff and reciprocal duties, directly impact liquefied petroleum gas (LPG), base oils, and related commodities.

For LPG, trade flows are being redirected away from the US–China corridor, driving regional price shifts. In base oils, the effect is seen in higher production costs and supply chain disruptions, intensified by the lack of tariff exemptions. Together, these developments are amplifying volatility across the energy trading sector and forcing market participants to reassess their strategies.

Impact on LPG Trading

China, historically the second-largest buyer of U.S. LPG, is pivoting toward Middle Eastern and other suppliers after the imposition of steep tariffs. This is projected to reduce China's demand by around 150,000 mt per day in the second half of 2025, reshaping market dynamics.

China's retaliatory tariffs, including an 84% levy on US propane and ethane, threaten U.S. exports of these key feedstocks. Ethane flows are particularly at risk, since nearly half of US ethane exports go to China and are critical for ethylene production.

As exports are rerouted to Europe, Japan, and India, downward pressure on US LPG prices may grow, disrupting revenues for shale producers while benefiting alternative suppliers such as the Middle East.

Looking ahead, traders should anticipate continued volatility in LPG pricing and demand. Diversifying export destinations and exploring alternate feedstock routes could mitigate risks, with strategic partnerships in the Middle East, India, and Southeast Asia becoming increasingly important.

Impact on Base Oil (Lubricants) Trading

Tariffs are also hitting the lubricants industry, particularly base oils such as Group III stocks and additive components. Supply chain disruptions are causing delays and higher costs for U.S.-based lubricant manufacturers.

Although U.S. tariff policy includes relief for core energy commodities, base oils are generally excluded, leaving the sector exposed. For example, JobbersWorld reports a 25% surcharge on Canadian lubricants, compared to just 10% on energy products. These higher costs, combined with logistical delays, amplify pressure on domestic producers.

Lubricant firms must reassess supplier networks, explore tariff-exempt jurisdictions, and consider local production to contain expenses. Shifting toward alternative base oil grades and innovating in additive sourcing could help buffer margins. In the long run, building resilient supply chains and customized procurement strategies will be key.

Taken together, Trump's sweeping tariffs are reconfiguring global energy and petrochemical value chains, cutting Chinese reliance on US LPG and ethane, while raising alarm among base oil producers facing rising costs. Traders must stay agile: diversify markets, source strategically, and continuously optimize supply chains to navigate this rapidly changing landscape. https://evicor.ch/