China Lifts 125% Tariff on U.S. Ethane Imports to Bolster Petrochemical Industry

China has quietly lifted a 125% tariff on U.S. ethane imports, imposed in April 2025 as a retaliatory trade measure. The waiver, not publicly announced, aims to support Chinese petrochemical firms reliant on U.S. ethane, a key feedstock for plastics and chemicals. This move is part of China's strategy to mitigate domestic economic impacts amid ongoing trade tensions with the U.S. The decision is expected to maintain supply to major Chinese importers and support U.S. exporters like Enterprise Products Partners, ensuring continued trade and infrastructure investments.

Tariff Imposed and Reversed Within Weeks

The 125% tariff on U.S. ethane was introduced by China earlier this month in response to a sweeping tariff hike by the United States targeting Chinese goods. The U.S. had announced a new round of duties under its "America First" trade policy, prompting Beijing to retaliate with increased levies on a range of American exports, including ethane.

However, the ethane tariff was short-lived. According to Reuters and other sources, the Chinese government decided to waive the duty in recent days, citing the need to protect domestic industries that depend on the imported feedstock. The waiver has not yet been officially announced by China’s Ministry of Commerce or customs authorities, and sources declined to be named due to the sensitivity of the matter.

Strategic Importance of Ethane in Petrochemicals

Ethane, a natural gas liquid derived from shale gas production, is a critical input for the petrochemical industry. It is primarily used to produce ethylene, a building block for plastics, solvents, and other industrial chemicals. China is the largest importer of U.S. ethane, purchasing nearly half of all U.S. exports.

In 2024, China imported a record 492,000 barrels per day (bpd) of U.S. ethane, according to the U.S. Energy Information Administration (EIA). The EIA projects that U.S. ethane exports will rise to 530,000 bpd in 2025 and 630,000 bpd in 2026, underscoring the growing global demand for the commodity.

The waiver is expected to ensure continued supply to major Chinese importers such as Satellite Chemical, SP Chemicals, Sinopec, Sanjiang Fine Chemical, and Wanhua Chemical Group. On the U.S. side, key exporters include Enterprise Products Partners and Energy Transfer, both of which have significant exposure to the Chinese market.

Industry Response and Market Implications

The decision to lift the tariff was welcomed by industry stakeholders. During an April 29 earnings call, Enterprise Products Partners CEO Jim Teague noted that the waiver came just minutes before the company’s quarterly report. He emphasized that the market had largely anticipated the move, and that ethane export volumes had not declined in the lead-up to the announcement. In fact, Enterprise reported a 68,000 bpd increase in ethane exports from its Morgan’s Point terminal.

Julian Renton, an energy analyst at East Daley Analytics, confirmed that the market had priced in the expectation of a waiver, and that both U.S. and international petrochemical firms had continued operations as if access to U.S. ethane would remain uninterrupted.

The waiver also provides a critical outlet for U.S. ethane producers, who rely on overseas markets to absorb surplus production. Ethane is a byproduct of shale gas extraction, and without sufficient export demand, domestic prices and production economics could be adversely affected.

Broader Context of Tariff Exemptions

The ethane tariff waiver is part of a broader pattern of selective tariff exemptions by China. In recent weeks, Beijing has also granted relief on U.S. imports of pharmaceuticals, aerospace components, and semiconductors. These exemptions appear to be targeted at minimizing the domestic economic fallout from the ongoing trade dispute with Washington.

While the waiver does not signal a resolution to the broader trade conflict, it reflects a pragmatic approach by Chinese policymakers to safeguard critical industrial inputs. Ethane, in particular, is not easily substitutable, and China’s domestic production capacity is insufficient to meet demand without imports.

Trade Volumes and Infrastructure Implications

The waiver may also encourage long-term infrastructure investments on both sides of the Pacific. U.S. exporters like Enterprise and Energy Transfer have built extensive terminal and shipping capacity to serve the Chinese market. On the receiving end, Chinese firms have invested in ethane crackers and storage facilities tailored to U.S. ethane specifications.

With the tariff removed, these investments are likely to remain viable, and future contracts may be signed with greater confidence. The move also reduces uncertainty in global ethane trade flows, which had been disrupted by the imposition of the tariff earlier this month.

References

• China Removes 125% Tariff on US Ethane Imports
• China waives tariffs on US ethane imports, sources say
• China waives tariffs on US ethane imports – Reuters
• China waives tariffs on U.S. ethane imports, Reuters reports
• China Spares Enterprise’s Ethane Exports from Tariffs
• China caves on 125% tariff for major US export after White House predicts Beijing can't keep up