COMMENTARY: Trade war intensifies as round 3 tariffs get closer

06 September 2018 17:21 Source:ICIS Chemical Business

As the third round of US-China tariffs looms, China finished plastics products will be in the crosshairs, along with additional US exports of commodity chemicals.

The third round of tariffs, which the US plans to put on an additional $200bn in Chinese imports, and China on $60bn of US imports, raises the stakes in chemicals and plastics. A consultation period in the US comes to an end on 6 September meaning President Trump is free to introduce them any time afterwards. China has threatened to respond to any new US moves on tariffs.

While the second round on $16bn in imports on both sides, in effect since 23 August, impacted around $2.0bn in US chemicals and plastics exports and $2.2bn in China’s, round three targets another $8.8bn in US exports of these products, and $16.3bn in China exports, according to the American Chemistry Council (ACC).

The US tariffs in the third round target China’s finished plastics products in particular. In round two, about $1.4bn in these exports were put under tariff. In round three, this jumps to $5.8bn, according to an ICIS analysis of 2017 US International Trade Commission (USITC) statistics.

Products under tariff in rounds two and three include everything from plastic tubes, pipes and hoses, plates, sheets, films, containers, bags and sacks, lids and caps, to wall and floor coverings, gloves and ponchos. This could diminish China’s overall demand for polymer resins.

If the third round of tariffs are implemented, the combined impact from rounds two and three on $7.2bn of finished plastics from China to the US will represent about 30% of US imports of these specific products under tariff, and 19% of US imports of all finished plastics products.

BULK CHEMICALS IMPACT

In the second round of China’s retaliatory tariffs, already in effect, the US bulk chemicals and polymers most impacted in terms of trade volumes to China are ethylene dichloride (EDC), styrene, high density polyethylene (HDPE), linear low density PE (LLDPE), monoethylene glycol (MEG) and polypropylene (PP), in that order, according to the ICIS Supply and Demand Database.

In contrast, the impact of US tariffs on China’s bulk chemicals and polymers exports to the US is minimal in the second round, at under 10,000 tonnes per product based on 2017 trade flows. This compares to US exports to China of 371,000 tonnes of EDC and almost 500,000 tonnes of HDPE and LLDPE combined last year.

In round three, US exports to China most impacted in terms of volume would be paraxylene (PX), ethylbenzene and methanol. But the overall impact on commodity chemicals would be less than in the second round.

For China bulk chemical exports to the US, the third round would be somewhat more impactful than the second round, but still relatively minimal. Notable products affected would include acrylic acid, acrylates, acetic acid, toluene diisocyanate (TDI) and vinyl acetate monomer (VAM).

Additional reporting by Al Greenwood and Fanny Zhang

 

By Joseph Chang