US-China trade war and its impact on chemicals and plastics

The US-China trade war has wide-ranging implications for the chemical industry. On this topic page you will find links to the latest related ICIS news and analysis plus graphics.

US-China tariffs – impact on chemicals and plastics

May 2019 presentation by ICIS Chemical Business Global Editor, Joseph Chang: “US-China tariffs – impact on chemicals and plastics”. Click on the slides to enlarge them.

US TARIFFS

  • Part 1 – $34bn. These 25% tariffs were published on 11 June 2018 and imposed on July 6. Click here to see the list. Chemicals are not included.
  • Part 2 – $16bn. These 25% tariffs were published on 11 June 2018 and went into operation on 23 August. The finalised list contains 279 from the original June list of 284. Click here to see the updated list published by the Office of the US Trade Representative.

These tariffs affect around $2.2bn of Chinese exports of chemicals and polymers to the US, according to the American Chemistry Council (ACC).

The impact 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, according to the ICIS Supply and Demand database.

  • Part 3 – $200bn. These 10-25% tariffs were published on 10 July 2018 and went into operation at 10% on 24 September. On 1 January 2019, the tariffs had been scheduled to rise to 25%.  But Presidents Trump and Xi agreed on 1 December to delay the hike by 90 days as they enter talks to resolve the dispute. This gave a new target date of 1 March 2019 for tariffs potentially to rise. Then in February 2019 President Trump announced he would delay the increase to 25% whilst he finalises a trade deal with China. On 5 May Trump tweeted that he would introduce the 25% rate “shortly”, and on 10 May the US confirmed it would impose the higher tariffs.  They applied to goods that left China from midnight on 10 May. 

The US has partially or fully removed 297 products from the original Part 3 list. Click here to see the final tariff list which contains 5,745 of the original 6,031 products in the earlier version.

In it, 142 chemicals and finished plastics (just two finished plastics) were removed compared with the preliminary list, according to an analysis by the ACC. The two finished plastics categories removed are plastic gloves – seamless and otherwise.

The final US round-three list includes a total of 1,363 chemicals and plastics products, of which the US imported $15.4bn worth from China in 2018.

The greatest impact of the US round 3 tariffs will be on finished plastics (chapter 39) imports from China – about $5.6bn worth from 2017 trade figures, according to the ACC. In round two, about $1.4bn in these exports were put under tariff. Organic chemicals come in second at $2.8bn.

For the most part, the products removed from the final list do not include bulk chemicals and plastics resins covered by ICIS, with the exceptions of vinyl chloride monomer (VCM) and paraffin wax. Also removed are five groups of rare earth elements used in fluid catalytic cracking (FCC) units, which produce gasoline and refinery-grade propylene.

Across all three rounds, the US tariffs cover 1,516 chemicals and finished plastics, representing $15.4bn in imports from China in 2017. China’s final list of third-round retaliatory tariffs on $60bn of US imports did not change from the original, and will rise from 5-10% up to 5-25% on 1 June 2019.

The round three list includes olefins, aromatics, alcohols, acetyls, acrylics, anhydrides, glycols and glycol ethers. Nitrogen fertilizers and surfactants are included as well as caustic soda and titanium dioxide (TiO2).

  • Part 4 – As China retaliated to the US third round, President Trump has threatened another round of tariffs on $300bn worth of additional imports. These were published on 13 May and were then put out for public consultation. They were due to be implemented at any time from June 2019. At the World Economic Forum on 3 July the two sides agreed to resume talks to try and end the dispute. The list does not contain many chemicals. Some forms of phenol, palm oil, fatty acids and finished plastic goods are targeted.
  • On 13 September 2018 President Trump signed the bipartisan Miscellaneous Tariff Bill (MTB), which was unanimously approved by the House and Senate. The legislation aims to remove tariffs against products which cannot be manufactured within the US. President Trump’s China tariffs are unaffected by the MTB tariff reductions, which apply to older tariffs.

Work on the bill began in 2016, before the current round of China tariffs was proposed.  It is designed to revise outdated tariffs which the National Association of Manufacturers says are now acting as a tax on US production. Click here to see the full list of products exempted from tariffs by the Miscellaneous Tariff Bill.

CHINA TARIFFS

On 15 June China said it would impose a 25% tariff on $50bn of US imports in retaliation for US President Donald Trump’s administration moving forward with US tariffs.

  • Part 1 – Tariffs on $34bn of US imports kicked in on 6 July, which included agricultural products such as corn and soybeans but not chemicals. Click here to see this list published in Mandarin.
  • Part 2 – China’s finance ministry also listed a second set of US exports valued at around $16bn, which include a wide variety of US chemical and energy products. China imposed an updated list of these tariffs on 23 August in response to the US tariffs. These tariffs affect around $2bn in US chemical and plastics exports, according to the ACC.

The list includes, for the first time, most grades of linear low density polyethylene (LLDPE) plus all high density PE (HDPE). Ethyl vinyl acetate (EVA) has been included as well as polypropylene (PP). Low density PE (LDPE) has been removed from an earlier list.

US bulk chemicals and polymers most impacted by the second round in terms of trade volumes to China are ethylene dichloride (EDC), styrene, HDPE,  LLDPE, monoethylene glycol (MEG) and PP, in that order, according
to the ICIS Supply and Demand Database.

Click on the slide to make it larger.

  • Part 3 – China’s Ministry of Finance announced on 18 September it would impose 5% and 10% tariffs on $60bn of US imports on 24 September as a countermove against the latest US measure. The tariffs went live, as planned, on 24 September.  Click here to see the full list of chemicals. On 13 May China announced the tariffs would rise from 5%-10% up to 5%-25%. These tariffs went live on 1 June.China has imposed a higher tariff rate of 25% on imports of toluene, xylene, paraxylene, methanol, purified terephthalic acid (PTA), polystyrene, acrylonitrile-butadiene-styrene (ABS), polyvinyl chloride (PVC) , toluene di-isocyanate (TDI) and methylene diphenyl di-isocyanate (MDI), among others. These chemicals were previously targeted with tariffs of 10%.
 

Leave a Reply