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First resin tariffs kick in for US-China trade war

Steve Toloken | PLASTICS NEWS

Washington -- The U.S.-China trade war officially came to the plastics materials sector Aug. 23, with the two countries kicking off tariffs in the early morning hours on about $4.2 billion in chemicals and plastics.

And those numbers could easily rise. The next round of proposed tariffs under consideration by Washington, covering $200 billion in Chinese goods, includes $25 billion in chemicals and plastics.

While it can be tough to keep track of what seems like a daily drumbeat of trade actions -- and retaliatory reactions -- Aug. 23 marks the first-time that tariffs have kicked in on substantial amounts of plastics resins and materials flowing between the countries.

There were some signs of de-escalating the larger trade conflict, with Washington and Beijing resuming talks this week. Meanwhile, plastics materials lobbying groups continued to press their case.

The American Chemistry Council testified against plans for 25 percent tariffs during a mammoth six-day series of hearings in Washington that began Aug. 20.

Materials companies including Kraton Corp. joined ACC, testifying or submitting written comments.

In general, they argued that the United States' low-cost shale gas give American plastics producers a global competitive advantage, and they worry that a trade war will cut their access to China's growing market.

"These tariffs will close off China's market to U.S. exports just when our industry was ready to supply China's large and growing demand for chemicals," Ed Brzytwa, ACC's director of international trade, told the hearing on its opening day, Aug. 20. "Trade flows between the U.S. and China will contract as tariffs are imposed on each side."

ACC released an analysis Aug. 22 estimating that $8.8 billion in U.S. chemicals and plastics exports to China would be hit if Beijing retaliates on the next round of U.S. tariffs on Chinese goods. That next batch of U.S. tariffs, on $200 billion in Chinese goods, includes tariffs on $16.4 billion in Chinese chemical and plastics exports.

The next round of tariffs could go into effect in late September or early October, ACC said, and would potentially be much more severe than the tariffs that began Aug. 23.

The Aug. 23 tariffs cover $2 billion in U.S. chemical and plastics exports to China and $2.2 billion in Chinese exports to the United States.

The Washington-based association argued that while it supports action to change China's trading practices, it said the sheer increase in the volume of goods covered would have a "potentially irreparable impact" on chemical supply chains.

The tariffs will force price increases on raw materials that will make U.S. firms less competitive globally against firms in countries that don't have those tariffs for inputs from China, ACC said.

"Supply chains are not plug and play. They cannot be easily reconfigured to meet the whims of U.S. trade policy," Brzytwa said. "Forcing companies to reconfigure their supply chains would threaten the viability of their businesses."

The U.S. resin sector has a trade surplus with China, in contrast with other segments of the plastic sector, which heightens its concerns about losing access to China.

More than 500 companies and organizations across all industries plan to testify in person over the six days, both for and against tariffs. More than 2,000 written comments were submitted.


Kraton comments

One of the written comments, from Houston-based Kraton, urged the U.S. government to drop tariffs on Chinese isoprene, a key component of Kraton's styrene-isoprene-styrene thermoplastic elastomer.

It said that the lack of sufficient domestic production of isoprene is not the result of unfair trade practices by China and argued that tariffs will hurt U.S. competitiveness in SIS manufacturing and shift production elsewhere.

"Kraton believes additional tariffs on isoprene will result in U.S. production of SIS being displaced by foreign production," the company said. "Foreign manufacturers of SIS, including those in China, will have lower costs for isoprene and will be able to produce and market their SIS at a price lower than Kraton will be able to match."

The Society of Chemical Manufacturers and Affiliates, which represents specialty chemical firms, said it was "exceptionally concerned" that tariffs will disrupt complex industry supply chains and U.S. chemical manufacturing would suffer.

"Specialty chemical supply chain modification is exceedingly difficult because specialty chemicals have purity and performance demands that require particularized expertise and infrastructure," said Matthew Moedritzer, manager of legal and government relations for the Arlington, Va.-based group.

If tariffs are enacted, he urged USTR to work with industry to make sure reasonable alternatives to Chinese suppliers are available.


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