Perc Pineda, PhD, Chief Economist, PLASTICS
December 9, 2025
The 2023 edition of our annual publication—Global Trends Report—attributed the slowdown in plastics manufacturing to higher borrowing costs.[1] The manufacturing sector is the plastics industry’s main customer. By extension, an interest-rate-driven manufacturing slump would have spillover effects on plastics manufacturing—and that is exactly what occurred over the last three years. When the federal funds rate reached the 4.00% upper limit of its target range, plastics manufacturing began to slow. In PLASTICS’ quarterly note to members, we highlighted the pullback in plastic products manufacturing from its 2021 peak. Manufacturers were able to continue meeting steady demand for plastics across the economy by drawing from elevated inventories, even as production remained constrained.[2] Recent data, however, show early signs of improvement following a period of manufacturing weaknesses.
Trade Dynamics and Tariffs
Against the backdrop of financial markets anticipating rate cuts, higher tariffs created uncertainty about a potential end to the downward cycle in plastics manufacturing. The U.S. plastics industry maintains a commanding trade surplus in plastic materials and resins, particularly polyethylene, but experiences trade deficits in other sectors, including plastics machinery, molds, and finished plastic products. In this year’s Global Trends Report, the trade surplus in resin reached a remarkable $23.7 billion, while dependence on imports in other sectors led to a $2.1 billion trade deficit.[3] Notably, over the last 27 years, the U.S. plastics industry has experienced a trade deficit in only four years.
The explanations for these trade deficits are complex, with dynamics varying annually and across trade partners. The white paper—Key Asian Countries’ Growing Share in the U.S. Plastics Market—highlights how imports of plastic products from Asian countries, based on trade data from 1990 to 2023, illustrate the ongoing persistence of trade deficits in finished plastic products.[4]
Policy Impacts and Tax Incentives
This year’s shifts in U.S. trade and tariff policy have had a measurable impact on the plastics industry. Higher costs of imported equipment and production inputs have elevated manufacturing expenses. However, processors benefit from the ability to immediately deduct the entire cost of eligible business assets from taxable income in the year they are placed in service—rather than spreading deductions over several years—which helps offset the impact of tariffs. Reciprocal tariff rates announced in April did not remain fixed, as trading partners negotiated adjustments with the U.S., and further negotiations are likely to lower tariffs. Addressing the optimal level of tariff rates remains important for industry planning.
Economic Outlook and Interest Rate Relief
In a market-driven economy, demand and supply adjust, and margin compressions and expansions are a reality. The Federal Reserve’s 50-basis-point rate cut this year, bringing the federal funds rate to a 3.75–4.00% target range, provides welcome relief. Financial markets are pricing in another 25-basis-point cut in the final Federal Open Market Committee (FOMC) meeting this month. The FOMC’s median long-run federal funds rate is projected at 3.6% in 2025 and 3.4% in 2026. However, as previously noted, it will take time for the economy to fully feel the impact of lower interest rates. [5]
Prices, Production, and Capacity Utilization
Despite expectations that higher interest rates and tariffs would drive prices up, the Producer Price Index (PPI) for plastic products manufacturing has declined over the last twelve months. The year-over-year change in the index was 0.5% in September this year, down from 1.3% in September last year. Lower energy and resin prices have helped restrain price increases in plastics manufacturing.
Recent data also show that plastic production has grown in consecutive months. In August and September, the Industrial Production Index for plastic products manufacturing rose 1.4% and 0.8%, respectively, from the previous month, while year-over-year growth was virtually unchanged in August (-0.02%) and up 1.9% in September. Capacity utilization in plastics and rubber products manufacturing increased over two consecutive months, from 73.0% in July to 74.0% in August and 74.3% in September. Earlier this year, in January, the industry recorded a five-year low of 72.2%. While utilization still has room to grow, recent data suggest that declines have stabilized.
Stable demand, lower borrowing costs, clarity on tariffs, and steady producer prices suggest a potentially expansionary outlook for U.S. plastics manufacturing, though this projection could change due to unforeseen disruptions and other external or internal factors.
[1] Plastics Industry Association. (2024, October). Global Trends 2024. https://www.plasticsindustry.org/data-report/global-trends-2024/
[2] For the monthly plastics demand estimate see: Plastics Industry Association. (n.d.). Plastics Demand Estimate. https://www.plasticsindustry.org/resource/plastics-demand-estimate/
[3] Plastics Industry Association. (2025, October). Global Trends 2025. https://www.plasticsindustry.org/data-report/global-trends-2025/
[4] Pineda, P., Shamamian, T. (2025). Plastic products from Asia whitepaper [White paper]. Plastics Industry Association. https://www.plasticsindustry.org/resource/plastic-products-from-asia-whitepaper/
[5] Pineda, P. (2025, November 4). Fed Funds Rate Cuts & Tax Breaks: Why the Plastics Industry Needs to Play the Long Game. Plastics Industry Association. https://www.plasticsindustry.org/blog/fed-rate-cuts-tax-breaks-plastics-industry/
