Shifting paradigms: AI reinvents established industry processes
Advances in artificial intelligence, especially agentic capabilities, have the potential to transform chemicals innovation and manufacturing fundamentally, enabling greater efficiencies.
The use of artificial intelligence in chemical research and development is no longer a future concept but a reality that helps companies to accelerate the discovery of new materials. Chemical companies are also increasingly integrating AI into every aspect of their operations while looking for partnerships with academic institutions and technology companies that would enable them to advance their AI capabilities.
AI is rapidly becoming a cornerstone of materials innovation, but significant challenges around computational speed, intellectual property security and trust are tempering its full-scale adoption, according to the findings of the recently published Accelerating Discovery: AI Trends in Materials R&D Report by Matlantis Corp. (Tokyo).
Matlantis is a company that develops tools and services using AI and computational science to advance materials development.
The report is based on a survey that includes companies from the energy, chemicals, semiconductors and automotive industries, and indicates a shift in how these firms approach innovation, with almost half of all R&D teams now using AI in some capacity.
Meanwhile, AI and machine-learning methods now drive an average of 46% of all simulation workloads, signaling a move from experimental trials to routine application, the report said.
Faster discovery is the primary catalyst for AI adoption, with 94% of survey respondents reporting that R&D teams have been forced to abandon promising projects due to prohibitive time requirements or computational resource constraints, the report said.
This pressure has created a strong willingness among researchers to embrace new, faster methodologies, even if it means a slight trade-off in precision, it said. About 73% of respondents would accept minor deviations in accuracy in exchange for simulations that run 100 times faster, it added.
“Nearly every team is experimenting with AI to push past bottlenecks, and they’re hungry for solutions that deliver results in days, not months, securely and accurately,” said the CEO of Matlantis, Daisuke Okanohara, cited in the report.
In addition, the financial incentive is clear, with organizations reporting an average saving of approximately $100,000 for every R&D project by leveraging computational simulation over purely experimental work, according to the report.
GRAF: Two waves of innovation change R&D.
The adoption of AI is not a general replacement of established techniques but rather the evolution of a hybrid workflow, the report said. R&D teams are blending conventional simulation methods with new AI-powered tools, with 42% of teams currently using AI-native platforms and another 34% in the process of piloting AI-augmented tools, it said.
“By harnessing AI and simulation together, we can explore materials faster than ever imagined … We see a future where breakthrough materials [for energy, climate, health] are discovered in a fraction of the time,” Okanohara said.
This hybrid approach extends to the underlying computer infrastructure, with the report finding no single dominant environment for running these complex simulations. Workloads are distributed across a mix of on-premises high-performance computing (HPC) clusters, private clouds, public clouds and hybrid cloud models, reflecting a flexible and diversified IT strategy, it said.
Significant barriers nevertheless remain, with security and intellectual property (IP) protection universal concerns, the report said. All survey respondents expressed caution about using external or cloud-based tools for sensitive research, the report added.
Trust in the output of AI-driven simulations is also still developing, with only 14% of respondents feeling “very confident” in the results generated by AI-accelerated tools, pointing to a need for greater validation, transparency and explainability in AI models, it said.
AI-driven R&D
AI is ushering in a new era for the chemical industry, with two distinct waves of innovation changing the way research and development is being carried out, according to Jeff Graf, global head of business development at SandBoxAQ (Palo Alto, California).
The first wave centers on large language models (LLMs) such as ChatGPT that are increasingly being adopted by chemical companies, Graf said. Many organizations are now developing proprietary, in-house LLMs trained on decades of historical data, including digitized lab notebooks and experimental records, he said. This approach effectively creates a “super scientist” — an AI system that can access and synthesize the collective knowledge of the organization, he added.
This does not represent new scientific discovery, but it revolutionizes knowledge management by making years of research easily searchable and actionable, accelerating scientific workflows, Graf said. Despite the clear benefits, adoption across the sector remains uneven, with some companies still in the process of digitizing and integrating their data, he said.
A second, more disruptive wave of AI is now emerging, mirroring the transformation seen in the pharmaceutical industry following the introduction of AlphaFold, he said. Unlike LLMs, this form of AI goes beyond summarizing existing knowledge, Graf said. It can model and understand complex chemical and biological systems, enabling new scientific discoveries, he added.
AlphaFold, an AI system developed by Google DeepMind that predicts a protein’s 3D structure from its amino acid sequence, has enabled pharma companies to design proteins de novo, fundamentally altering R&D strategies and fostering new partnerships focused on protein engineering, Graf said. “This shift has yet to fully materialize in the chemical sector, but recent developments suggest a similar transformation is imminent,” he said.
SandboxAQ emerged in 2022 as an independent, growth capital-backed company from Alphabet Inc. (Mountain View, California), the parent company of Google LLC (Mountain View). SandboxAQ focuses on the intersection of AI and quantum technology.
SandboxAQ is leveraging advanced AI models, building on the work done at Alphabet under its “moonshot” initiatives program, Graf said. The company has addressed earlier limitations in advanced simulation by enhancing the underlying physical models, incorporating more accurate density functional theory (DFT) calculations and expanding the dataset to include commercially relevant materials such as iron, cobalt and lithium, he said.
The result is a tool designed for industrial discovery, enabling companies to explore chemical space and identify new catalysts and materials with unprecedented speed and accuracy, he added. The public release of these advanced models marks a pivotal moment for the industry, “democratizing” access and fostering collaborative innovation, Graf said.
As AI-driven R&D becomes more sophisticated, companies that embrace these technologies are poised to lead the next wave of chemical innovation, whether in carbon capture, ammonia synthesis or other transformative applications, Graf said. Companies that continue to rely solely on traditional high-throughput laboratory screening risk falling behind, echoing the paradigm shift seen in pharma, he added.
AI for project delivery
Accenture PLC published two reports in its “Powered for Change” research series that focused on the evolving landscape of industrial decarbonization and how best to address it. The recently published second report explores how AI-driven solutions can be deployed consistently to support companies in heavy industries such as chemicals to adopt a multigenerational approach to their decarbonization efforts.
Reducing the unit cost of infrastructure required for decarbonization is a common challenge across heavy industries, including chemicals, power generation and green hydrogen production, according to Rob Hopkin, net-zero infrastructure lead at Accenture.
COLEGRAVE: AI policy aims to foster culture of trust.
Whether constructing new transmission lines, power plants or foundational infrastructure such as concrete and piling, the opportunity to accelerate delivery and improve capital efficiency lies in shifting from a project-centric to a portfolio-based approach, Hopkin said.
Many chemical companies continue to organize their capital project delivery around individual, standalone projects, with dedicated teams and stage-gate processes guiding investment and execution from design to commissioning, he said.
This approach is familiar, but it often results in bespoke solutions that limit opportunities for replication, whether in design, supply chain partnerships or team expertise, which restricts the learning and scale effects that can drive significant efficiencies in capital project execution, he said.
By viewing each project as part of a multigenerational investment portfolio, organizations can maximize repeatability across concepts, designs, supply chain relationships and delivery teams, Hopkin said. This institutionalizes best practices and lessons learned, enabling continuous improvement and driving down costs and timelines with each successive generation of projects, he said.
While this transition poses organizational challenges, the value gains can be substantial, Hopkin said. Other sectors such as shipbuilding have demonstrated the benefits of this approach, where building a series of ships as a single program results in dramatic cost reductions and supply chain optimization by the final vessel, he said.
The principles of standardized, multigenerational infrastructure delivery are highly relevant to the chemical industry, particularly among specialty chemical producers, said Serge Lhoste, global chemicals strategy lead at Accenture.
A typical specialty chemical company may operate several production sites worldwide, and despite similarities in technology across business units, operational commonality is often lacking even within the same business unit, Lhoste said. This fragmentation presents a significant opportunity for improvement, he said. By harnessing AI and embracing repeatable, standardized processes across multiple project cycles, chemical companies can drive substantial gains in cost efficiency at each site, he said. The focus is on leveraging digital tools to identify best practices, optimize operations and enable consistent performance improvements across the enterprise, Lhoste said.
Hopkin added that AI is increasingly recognized as a powerful tool for enhancing repeatability and efficiency in capital project delivery within the chemical sector.
Traditionally, engineering teams select project concepts and carry out front-end design, but this process often leads to divergence from standardized approaches due to a series of complex, incremental decisions, Hopkin said. Such variations can undermine the benefits of replication, making it difficult to identify and assess their impact, he said.
AI offers a solution by analyzing extensive engineering documentation, pinpointing deviations from established standards, and providing visibility into where and why such divergences occur, Hopkin said. This enables organizations to make informed decisions about whether these variations are justified, balancing the advantages of standardized equipment and buying power against potential operational gains from customization, he said.
AI-driven insights facilitate optimization across portfolios, ensuring that repeatability and operational performance are maximized, he added.
AI is also set to revolutionize end-to-end processes, particularly risk management, Hopkin said. Effective risk identification and mitigation are critical to project success, yet current practices are hampered by fragmented data and complex documentation, he said. AI can integrate information across the engineering, scheduling, cost and supply chain domains, rapidly connecting data points to surface risks earlier and providing a richer understanding of their implications, he added.
Existing technologies already analyze historical risk registers and optimize schedules to recover from delays, Hopkin said. The next step is integrating these capabilities through agentic AI, orchestrating the entire risk-management process and compressing the time from risk identification to mitigation, he noted. AI eliminates cognitive biases and siloed communication, enabling seamless access to comprehensive project data and enhancing the quality of decision-making, he said.
Integrating AI in chemistry
Specialty chemicals producer Syensqo SA is integrating AI into its operations. The company has established a dedicated team tasked with advancing AI across the organization. Syensqo.ai has adopted a bottom-up approach over the past two years, soliciting input from across the company and evaluating more than 600 potential use cases for AI deployment, according to Vincent Colegrave, head of AI at Syensqo. “This collaborative effort has enabled the team to identify and test promising applications while concurrently defining several strategic priorities,” Colegrave told CW.
The development of SyGPT, Syensqo’s proprietary internal chatbot launched in June 2024, is such an initiative. SyGPT is designed to foster trust and understanding of generative AI among Syensqo’s employees, Colegrave said. It reflects the company’s commitment to confidentiality and security, which are core values for an IP-driven business, he said. “The chatbot has been made accessible to all staff, enabling widespread experimentation and feedback while ensuring that no employee is left behind in the adoption of new technologies,” Colegrave added.
Meanwhile, Syensqo has introduced its first AI policy, which was developed in close consultation with its European works council and labor unions, he said. Key principles of the policy, now approaching its first anniversary, include maintaining a human-in-the-loop approach to decision-making and a firm stance against using AI for employee surveillance, Colegrave said. “These measures are designed to foster a culture of trust and transparency as AI becomes increasingly embedded in Syensqo’s operations,” he said.
Syensqo’s AI journey is not solely about technology, Colegrave said. It is also viewed as a strategic imperative requiring attention to modify management, adoption and training, he said. Building on this foundation, the company has pursued additional strategic use cases and partnerships, he added.
Syensqo signed a memorandum of understanding with Microsoft last year that is focused on the integration of AI into scientific research. As one of the first partners of Microsoft’s Discovery platform, Syensqo is pioneering agentic AI workflows that leverage advanced agents to analyze publications, patents and internal data, streamlining the process of identifying high-impact research targets, Colegrave said.
Parallel efforts include the deployment of machine-learning models to accelerate the development of new polymers, with successful implementations reported in several business units, he said. “The Discovery platform is expected to scale these capabilities across Syensqo’s research operations, though the company acknowledges that adoption and impact will take time, requiring ongoing engagement and feedback from its diverse scientific community,” he said.
Syensqo is also applying AI to its commercial engine through its SYGROW solution that uses generative AI to identify promising leads and uncover blind spots while aggregating data from multiple systems to produce comprehensive customer reports, Colegrave said. The solution was developed in collaboration with the company’s sales team, and it has been able to streamline internal collaboration and enhance the efficiency of commercial operations, he said.
Syensqo is also exploring AI-driven workflows to optimize maintenance, with a focus on operational uptime and sustainability, Colegrave said. “Initial results have been encouraging, and the company is now evaluating opportunities to scale these approaches more broadly,” he said.
LIN: Redefining chemical synthesis.
Merck KGaA is another chemical company using AI as a “critical enabler” across its chemicals and materials R&D activities, it said. AI is not just a tool for efficiency, but a prerequisite for solving complex scientific challenges and accelerating innovation across the company’s business sectors, Merck told CW.
Merck uses AI to accelerate the discovery and development of next-generation drugs and materials while harnessing data and AI to enhance product quality, improve manufacturing yields and strengthen supply security, the company said. “AI is helping us move from an era of discovery to one of engineering — particularly as we leverage the convergence of chemistry, AI, and high-performance computing. This is central to deliver next-generation materials and chemicals faster and more effectively than traditional approaches allow,” Merck said.
AI-focused partnerships
Partnerships are one of the main ways in which chemical companies are able to advance their AI capabilities. Syensqo announced a partnership with Mohammed VI Polytechnic University (UM6P; Benguerir, Morocco) in October 2025 to advance AI within the chemical industry.
The collaboration is designed to foster creative approaches to technology development, leveraging the expertise and fresh perspectives of UM6P’s College of Computing and AI research teams, Colegrave said. “Recognizing the opportunity to bridge the gap between current capabilities and future ambitions, Syensqo and UM6P have jointly established an AI lab dedicated to exploring cutting-edge solutions,” Colegrave added.
The initiative aims to build a Syensqo-UM6P team, with recruitment efforts underway to attract young graduates and emerging talents who possess a strong understanding of core AI technologies and the scientific foundations central to Syensqo’s business, he said.
The core objective of the AI lab is to deepen Syensqo’s technological capabilities, particularly in transforming data into actionable knowledge, Colegrave said. The partnership will focus on foundational models and advanced scientific topics, with UM6P serving as a key collaborator in these specialized areas, he said.
Syensqo also plans to work with major hyperscale providers to ensure scalability and enterprise-grade implementation, while dedicating significant resources to fine-tuning and customizing solutions at the university level, Colegrave said. “Interest in the initiative has been robust, with students and professionals at UM6P eager to participate. The collaboration strengthens Syensqo’s presence in Morocco and opens doors to the broader African market. Morocco’s strategic geographic position enables effective engagement with Europe and the United States, offering a pragmatic approach to global expansion,” he added.
In addition, Syensqo is actively engaging with industry partners in China, a market recognized for its rapid technological advancement, Colegrave said. The company has initiated the formation of a dedicated team to evaluate opportunities and potential collaborations with leading institutions in the region, he said.
Discussions are ongoing, and Syensqo is taking a measured approach to ensure that it aligns with the right players within the local ecosystem, Colegrave said. “Syensqo adopts a pragmatic approach in navigating its evolving technological ecosystem, recognizing that advancements in AI are fundamentally shifting industry paradigms,” he said.
Meanwhile, in January 2026, Merck signed a memorandum of understanding with ChemLex Ltd. (Singapore) to explore collaboration to enhance the speed, efficiency and reproducibility of chemical research across early discovery and development workflows within Merck’s various business sectors.
ChemLex is a technology startup that has developed a platform for AI-driven automated chemical synthesis. The company’s high-throughput automated laboratory and AI technology platform will provide chemical synthesis and related services to Merck aimed at shortening Merck’s R&D cycle and optimizing resource allocation, Merck said.
ChemLex is building the world’s most advanced self-driving laboratory, which is an R&D engine that enables rapid, low-risk synthesis of molecules that were previously too costly or time-consuming to produce, according to Sean Lin, founder and CEO of ChemLex. “Our strategic priority is to redefine how chemical synthesis is done by creating a ‘new language of discovery,’ reflected in the name, ChemLex: Chemistry meets Lexicon. Through a high-throughput, AI-powered platform and a central AI scheduling system, we make the exploration of chemical space faster, safer, greener and more efficient, allowing scientists to focus on innovation rather than technical constraints,” Lin said.
ChemLex’s AI-powered chemical synthesis is designed to learn in the way human chemists do, but with active learning at machine scale, Lin said. It operates as a closed-loop system that integrates an automated wet lab with an AI-powered dry lab, allowing design, execution and learning to happen continuously, he said.
“In simple terms, the robots are the hands of the chemist, running experiments with speed and precision, while the AI is the brain, designing reactions, analyzing results and deciding what to do next. Each experiment feeds high-quality data back into the system, enabling the AI to improve, adapt and tackle increasingly complex chemistry over time,” Lin said.
This fundamentally changes how chemistry is done, he said. By combining automation with AI, ChemLex turns chemical synthesis from a slow, manual process into a scalable discovery engine, opening up vast areas of chemical space that were previously inaccessible and enabling faster innovation at lower cost across pharmaceuticals, materials and specialty chemicals, Lin said.
German engineering manufacturers face sharp order decline amid global trade crisis
Germany’s mechanical engineering sector recorded a steep 19 percent year-on-year drop in new orders in September 2025, reflecting ongoing strain from the global trade crisis and weakening industrial demand, according to the German Engineering Federation (VDMA).
The decline also contributed to a slight contraction in total orders for the first nine months of the year.
Base effects mask deeper structural weakness
VDMA chief economist Dr. Johannes Gernandt said that part of the year-on-year decline stemmed from base effects, as September 2024 had benefited from large-scale plant orders that did not recur this year. “That should not obscure the fact that the machinery and equipment manufacturing industry continues to experience a noticeable slump in demand and underutilization,” Gernandt warned.
He stressed that a sustainable recovery depends on resolving global trade disputes, including US punitive tariffs, and on structural reforms in Germany and Europe to reduce cost burdens and stimulate investment.
The federation reaffirmed its forecast of a five percent contraction in real production for 2025.
Foreign demand collapses, euro zone more resilient
The September 2025 figures show a five percent drop in domestic orders and a 24 percent drop in foreign orders. Orders from euro zone countries fell by 13 percent, while those from non-euro zone countries decreased by 27 percent.
In the third quarter of 2025, overall orders were six percent lower than a year earlier, with domestic orders down by three percent and foreign orders down by seven percent, while orders from euro zone countries and non-euro zone countries fell by two percent and by nine percent, respectively, all on year-on-year basis.
In the January-September period of this year, total orders edged down by one percent compared with the same period last year, while euro zone orders increased by 10 percent and non-euro zone demand fell five percent, both on year-on-year basis.
CLEPA: EU losing ground in global automotive market
Europe’s automotive suppliers have issued a stark warning to authorities to support the industry or risk manufacturing capabilities leaving the continent.
“With up to 75% of the value of vehicle components made in Europe, the continent’s automotive supply industry generates substantial economic value and supports hundreds of thousands of jobs,” according to the European Association of Automotive Suppliers (CLEPA). “Yet Europe’s automotive suppliers are issuing a stark warning based on a recent study of European value creation: without urgent and decisive EU action, the continent risks losing its industrial backbone, hundreds of thousands of jobs, and its capacity to lead in clean mobility and innovation.”
A new study by Roland Berger, commissioned by CLEPA, highlights that European suppliers face a cost disadvantage of 15-35%, mainly driven by high energy and labour costs, regulatory burdens, and fragmented frameworks. Meanwhile, countries such as China and the US combine industrial support measures with protective mechanisms, creating structural disadvantages and unfair competition, the association claims.
According to the study, without urgent EU action, up to 23% of European value add is at risk by 2030 through the combined effect of powertrain transition and value transfer outside the EU. In practice, Europe could see the loss of up to 350,000 jobs, eroding both employment and the industry’s wider social contributions, Kallanish notes.
“Europe is in a decisive battle for its industrial sovereignty,” says CLEPA secretary general Benjamin Krieger. “Suppliers are committed to invest and innovate, but they cannot do so on an uneven playing field. Maintaining a competitive and resilient automotive ecosystem in the EU will require urgent, market-driven action by industry and targeted policy measures, to strengthen Europe’s attractiveness as a location for manufacturing, R&D and investment.”
This includes addressing key location factors such as electricity prices and regulatory burden, while also considering policies to ensure EU local content in vehicles to retain know-how and production capacity, he adds.
Suppliers employ 1.7 million people in Europe and invest €30 billion ($35 billion) in R&D annually. CLEPA is thus urging policymakers to swiftly address competitiveness challenges, evaluate options to reduce structural costs and cut red tape. It should also prioritise technology openness in decarbonisation, in a swift revision of CO2 standards regulation for cars, vans and trucks.
Svetoslav Abrossimov Bulgaria
US tariffs undermine recovery for European manufacturing
2025 is unlikely to see a long-awaited rebound in European industrial production and metals consumption, primarily steel. While the impact of earlier investments could improve the second half of the year, more substantial changes that have been set in motion to revitalize EU manufacturing have been postponed to 2026, multinational ING bank said.
At the start of the year, industrial production in the EU and the eurozone was 5% lower than two years ago, while it has remained stable in the US, and China recorded a 13% growth in that same period, ING noted in a report published on May 1.
February saw production in both the EU-27 and the eurozone rise to the highest level since August 2024, and in April, the manufacturing output PMI rose to 51.2 — the highest level in almost three years. According to ING, while the longstanding decline in European industrial production, which began in the first quarter of 2023, has shown signs of bottoming out with improved purchasing power, new uncertainties stemming from US President Donald Trump’s import tariffs are now eroding confidence and dampening investment in the manufacturing sector.
EU’s 20% reciprocal tariffs have been postponed for 90 days, but 25% tariffs on steel, aluminum, cars and auto parts remain in place, while most other EU-manufactured goods are now subject to a 10% tariff.
Eurozone exports to the US increased materially before tariff announcements were made, but “as long as tariffs remain in place and uncertainty about further and higher levies lingers, the US [the largest export destination providing 20% of extra-EU trade] will probably no longer be a growth market for European goods,” says ING.
While it is impossible to fully quantify their impact, ING reckons 20% tariffs will shave off 0.3 percentage points of eurozone GDP growth over the next two years. Aside from pharma, the machinery and equipment sectors that in 2024 made up 26% of EU’s Eur530 billion exports to the US – will be among those hit hardest, the bank estimates.
“The picture may change somewhat in the second half of the year, if the trade storm subsides and European producers and consumers can look ahead with more confidence,” says ING adding that “in the meantime, uncertainty over trade barriers remains a major disruptive factor for confidence and investment,” and that “we probably have to wait until 2026 for a substantial increase in industrial production due to government investments in infrastructure and defence.”
The escalation of trade tensions between the US and China will also have a negative effect on EU manufacturing as China seeks markets outside the US for its exports, although European exporters may well show resilience too and successfully shift part of their trade from the US to other countries. Meanwhile, the EU is already pursuing new trade agreements and forging partnerships with countries such as Mexico, Chile, Switzerland, Malaysia, and South American states.
However, conditions will remain difficult for longer for energy-intensive industries given that gas prices in Europe remain four to six times higher than in the US, and electricity is two to three times more expensive, ING estimates. The proposed measures on affordable energy from the European Commission could yield results, but immediate energy supply boosts are unlikely.
A number of steelworks – falling victim to lower domestic end-user demand, especially dwindling procurements by manufacturers of machinery, electrical equipment, and motor vehicles, whose productions declined the most in 2024, — have been shut across Europe recently as global overcapacity in steel has increased to a level that exceeds the total steel production of OECD countries.
The EU is now bracing for its basic industries’ competitiveness to be eroded further as US tariffs are expected to prompt more steel directed to the European Single Market, which in a persisting environment of high energy prices and weak demand will result in an increasing number of basic industrial companies shifting investments away from European soil.
Although the EU housing market is picking up and US import tariffs are having little impact on many European building material suppliers, manufacturers of metal and plastic semi-finished products do not see their prospects improving much for the time being, while a substantial increase in production isn’t expected until 2026.
Discussing other differences between sectors and countries, ING noted that high-tech industries, including electronics and air and spacecraft, are somewhat better off with an uptick in their production levels in February, while basic and mid-tech industries, including machinery and transport equipment, are affected by rapid technological advances and large-scale government investments in China that have made the country a fierce contender in traditional European strongholds.
Within the EU, Spain and Poland have managed to maintain stable production over the past two years, while Germany, Italy, and the Netherlands have experienced a steady decline.
Steel, automotive tariffs cause manufacturing uncertainty
Uncertainty remains over the impact recent US tariffs will have on the steel and automotive sectors, Stephen Phipson, chief executive of Make UK, said during a Business and Trade Committee hearing this week.
“We’re waiting for the full effects,” Phipson noted, highlighting three main areas of concern, with possible direct and indirect impacts on demand and jobs.
“There is a case to be made that some areas, they can probably stand a 25% tariff in terms of the consumer prices, but others certainly can’t. So there would be a direct effect there,” he said.
“There is the indirect effect, particularly around the EU; a lot of our … manufacturers are in the supply chain to EU businesses, which are then exporting final products to the US. It depends on where the EU negotiations end up as to what the effects will be in terms of volumes on UK manufacturing; so, that’s a grave concern,” he added.
For some steel products, he expects buyers to pay the 25% tariff as they cannot currently be sourced domestically in the US.
“With the 25% on steel, which [are] not normal steel products. These are advanced products. These are more specialty steel, specialty components. Now, in a lot of cases, the customers can’t do without those. They’re the single source for those items. So, the consumer will actually end up paying the 25%, but the question … is, does that curtail demand in the process of doing it whilst people re-source, if those tariffs persist for any length of time?”
Stability is also a concern, Kallanish learns from the session.
“We don’t know from one day to the next, whether [US President Donald] Trump’s going to carry on, whether he’s going to suspend, whether he’s going to change; it makes planning your business and your investments extremely challenging,” Phipson said.
“It’s … very difficult to know exactly what the demand reduction will be as a result of tariffs,” he added.
He also highlighted the work manufacturers were doing to mitigate the impact.
“Other manufacturers are … putting in temporary contingency plans at the moment, hoping that in the next month or two we can get some sense, and they don’t have to do the next level, which will be, if you see a demand reduction, scaling back factory capacity.”
He told the committee the manufacturing sector will “absolutely have to” lay off staff if a tariff deal is not done with the US by summer.
“Many of [the] large companies [have] put contingencies in place … [which] gives them maybe three months of gap. So that gives you an order of time scales before there would be a reduction in capacity planned,” Phipson noted.
“For SMEs, they’re living hand to mouth. They want to know day to day whether adding 10% to their product is going to reduce the amount of volume they’re shipping to the United States. And so for them, it’s a much more direct impact; so the larger ones can put this off for a few months, but the smaller ones are going to see it now,” he concluded.
Carrie Bone UK




