US-China tariffs will begin to hit plastics

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Photo by Rubber& Plastics News US government says the tariffs will give it leverage to challenge Beijing's trade policies,

It's now official. Tariffs will be levied on billions of dollars of resin imports and exports between the United States and China starting 23 Aug.

The US Trade Representative announced the widely expected 25% tariffs on $16bn (€13.8bn) in Chinese imports on 7 Aug, and Beijing immediately responded with tariffs on US exports.

The American Chemistry Council declined to comment on the latest USTR announcement, but it previously argued against it, estimating that the Chinese retaliatory tariffs would hit $3.2bn (€2.7bn) worth of US plastics exports to China, and that the American tariffs would hit $2.2bn (€1.9bn) in chemicals and plastics imports from China.

The US government says the tariffs will give it leverage to challenge Beijing's trade policies, adding that it will soon release details on how companies can apply for exclusions.

Those $16 billion in tariffs complete what is considered President Donald Trump's first round of tariffs on China, totalling $50bn (€43bn). The first $34bn (€29.3bn) in US tariffs, including on Chinese-made plastics equipment, began 6 July.

The next round of tariffs also will likely include plastics and chemicals.

The Trump administration has proposed 10% tariffs on an additional $200bn (€173bn) in Chinese imports — which ACC estimated includes $16.4bn (€14bn) in chemicals and plastics. China has responded with a proposed $60bn (€51.7bn) in tariffs on US exports. According to ACC's estimate, Beijing's list of 5,200 goods include 1,000 that are chemical and plastic products.

Trump has also threatened to raise those 10% tariffs to 25%. Hearings on those $200bn (€173bn) in duties are set to begin 20 Aug.

Commenting on the duties, Ashish Chitalia, Mackenzie Principal Analyst, said the new set of tariffs on chemicals predominantly include lubricants, plastics resins and finished goods for pipes, tubes and fittings.

"The import duty on plastic resins will have a negligible impact, as the US only imports 1.5% of polymers, such as polyethylene, polypropylene, PVC, polystyrene, and PMMA, from China.

"The more significant impact will be felt in the area of plastics pipes, hoses and tubes - the United States imports around 20%," Chitalia added.

According to the expert the majority of plastic fittings in the US are sourced from Mexico and Canada, accounting for more than 50% of imports. The duty on finished goods, such as plastics pipes, hoses and tubes, would result in higher delivery costs and force buyers to find alternative sources.

"A continued tariff makes the investment environment uncertain for petrochemical/plastics producing companies and for finished goods manufacturing firms," Chitalia added. 

According to Chitalia, despite multi-billion-dollar investments in petrochemicals and plastics industries by the two countries, risk assessments are becoming increasingly challenging due to the uncertainty around the tariffs and their impact on commodity prices, logistics, supply chain and currencies.

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