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The US did not supply Saddam Hussein with chemical or biological weapons. While he was a puppet of the USSR (from whom he acquired the bulk of his weaponry) he also acquired training and expertise in chemical and biological warfare. He had highly skilled and knowledgeable scientists who excelled in developing chemical and biological weapons. He produced most, if not all, of his chemical arsenal. Mustard agent is quite simple and relatively inexpensive to manufacture and Iraq used it in large amounts against Iran. He would essentially slime an area in the same way you would plant mines -- for area denial.
He used the nerve agent Sarin against domestic targets. From a cynical standpoint, Sarin is not persistent, therefore it makes an effective agent to remove an unwanted population without rendering the area uninhabitable.
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