First polymer tariffs kick in for US-China trade war

Washington — The US-China trade war officially came to the polymer materials sector 23 Aug, with the two countries kicking off tariffs in the early morning hours on about $4.2 billion (€3.6 billion) in chemicals, plastics and rubber.

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 polymers.

While it can be tough to keep track of what seems like a daily drumbeat of trade actions — and retaliatory reactions — 23 Aug marks the first-time that tariffs have kicked in on substantial amounts of polymer 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, polymer-supplier lobbying groups continued to press their case.

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

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 US 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, 20 Aug. "Trade flows between the US and China will contract as tariffs are imposed on each side."

ACC released an analysis 22 Aug estimating that $8.8 billion in US chemicals and polymer exports to China would be hit if Beijing retaliates on the next round of US tariffs on Chinese goods. That next batch of US 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 23 Aug.

The 23 Aug. tariffs cover $2 billion in US chemical and plastics exports to China and $2.2 billion in Chinese exports to the US.

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 US 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 US trade policy," Brzytwa said. "Forcing companies to reconfigure their supply chains would threaten the viability of their businesses."

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

More than 500 companies and organisations 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.