The recently announced one-year tactical pause in tariff measures has moderated tensions in the near term, but it is more accurately viewed as a planned adjustment period rather than a shift in the underlying relationship. This interval allows room for policy recalibration and for both sides to address domestic priorities ahead of the more consequential developments expected in 2026.
For the energy and chemical sector, this pause provides actionable short-term trade openings while also signaling a longer phase of structural changes in supply chains, technology development, and material security.
1 | Short-Term Easing: Breathing Room Rather Than Structural Relief
Despite its stabilizing effect, the pause reflects tactical breathing room rather than a substantive easing.
Policy setting
Tariff escalation has been suspended for one year, but the effective weighted tariff level still stands around 30.9%, above several major trading partners. This suggests institutional tariff pressure has not been dismantled - only temporarily moderated.
Underlying motivations
- One side aims to manage inflation pressures, stabilise agricultural exports, and navigate domestic political considerations.
- The other seeks space to consolidate its recovery in consumer demand.
This creates a narrow and time-bound alignment of interests, not a structural convergence.
Role of rare earths and critical materials
Rare earths represent long-cycle industrial capabilities across mining, separation, and permanent magnet technologies. Given the difficulty of short-term substitution, this serves as an additional buffer, making a temporary pause feasible without altering long-term constraints.
Overall assessment
The pause provides time, not resolution. It opens room for policy testing and commercial adjustment, but does not change the strategic boundaries of the relationship.
2 | Strategic Build-Up: Why 2026 Becomes a Critical Inflection Point for the Energy & Chemical Sector
The core meaning of the truce lies in buying time for technological acceleration.
Both governments are prioritizing breakthroughs in AI, quantum technology, and biotechnology. These domains rely not only on algorithms but fundamentally on energy consumption, materials, and industrial infrastructure - areas where the energy & chemical sector plays a foundational role.
Power & energy systems
Advanced computing requires scalable, low-cost electricity and long-duration storage. The economics of green power and storage directly shape the cost of computing capacity.
High-end materials
Semiconductors, aerospace, and quantum devices depend on carbon fibre, engineering plastics, photoresists, and electronic-grade chemicals - the highest value-added segments of the chemical industry.
Infrastructure
Hydrogen networks, zero-carbon industrial parks, energy-intensive data centres, and storage facilities will determine whether technological breakthroughs can scale into industrial productivity.
Implication
The competitiveness of next-generation technologies ultimately rests on whether the energy & chemical industry can provide scalable, reliable, and cost-effective inputs.
3 | Why AI Becomes the Pivotal Battleground - and How Energy & Chemicals Define the Cost Curve
AI is widely viewed as a key pivot for the next policy cycle. Its development trajectory relies on (GL Consulting):
- Power supply costs, which determine the affordability of computing;
- Localization of high-end materials, which affects hardware stability;
- Integration of energy-materials-infrastructure, which shortens the path from technology to scaled deployment.
In effect, the direction of AI development reflects the cost structure and resilience of the broader energy and chemical ecosystem.
4 | Implications for the Energy & Chemical Sector: Short-Term Opportunities and Long-Term Shifts
(1) Short-term: Opportunities that are actionable within 3-12 months
Tactical recovery in LNG/ethane flows
Partial resumption of LNG receipts opens space for SPA renegotiation, improved destination flexibility, and more favorable pricing structures.
Export-related demand recovery
Improvement in traditional export sectors - home appliances, machinery, basic chemicals, textiles - supports upstream chemical feedstock consumption, especially into year-end seasonal cycles.
Battery and material exports gain momentum
With enforcement of certain restrictive rules temporarily eased, lithium-ion batteries show strong performance (USD 55.38bn in Jan–Sep 2025, +26.75% YoY), with further upside anticipated.
Reduced geopolitical risk premium
Market sentiment stabilization provides a more favorable window for long-term procurement negotiations across LNG, crude, and key chemical inputs.
(2) Long-term: Structural changes that are unlikely to reverse
Diversification and de-risking of supply chains
Single-source procurement models, such as heavy reliance on ethane imports from specific regions, face rising structural risk. Regionalization and multi-source configurations are expected to become standard practice.
Technology-related segmentation in high-end materials
Automation software, catalysts, and advanced material inputs remain areas with potential bottlenecks, accelerating domestic substitution.
Shift toward internal circulation and RMB settlement
Broader use of RMB in commodity settlement is expected to reshape pricing and financial flows over time.
"15th Five-Year Plan" as a security roadmap
The plan emphasizes energy security, industrial resilience, and supply-chain robustness, forming the directional basis for capacity layout and investment across energy and chemicals.
5 | How Companies Should Use This Window
Short-term actions
Reassess LNG/ethane procurement strategies, seek more flexible contract terms, and optimize cost windows.
Medium-term focus
Accelerate development or cooperation in high-end material segments; participate in pilot projects such as zero-carbon parks and green hydrogen.
Long-term positioning
Build diversified sourcing networks, develop substitute feedstock pathways, and integrate RMB-denominated financing tools to reduce external exposure.
Conclusion
The China-U.S. truce offers short-term commercial gains and a critical buffer period before renewed competition intensifies in 2026.
Energy & chemical firms must operate on both timelines:
- Capture near-term trade recovery, and
- Reinforce the underlying capabilities in energy, materials, and industrial infrastructure that will determine competitive outcomes in the next global cycle.
The above content is the major conclusions and highlights extracted from China (Energy Transition) Policy Perspective produced by GL Consulting. Click the hyperlinks for the full text or email glconsulting@mysteel.com.
