PE, trade and tariffs

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RealityChek Tonelson

It’s hard to find a bigger fan of tariffs than economist Alan Tonelson.

One recent post on his independent RealityChek blog was titled “More on Why Tariffs Can Bring Back Much U.S. Manufacturing.” Another was titled “No Reasonable Doubt Left that Trump is Right as Rain on NAFTA and Offshoring.”

But could tariffs on imports proposed by the Trump administration be damaging to U.S. polyethylene resin makers, who need to export much of the new capacity they’re adding this year and beyond? Could other countries retaliate by placing tariffs on that new PE?

In a recent chat with Plastics News, Tonelson said he doesn’t see that happening, mainly because exported PE often is converted into finished products that then need to be brought back into the U.S.

“There could be retaliation, but I don’t think it would amount to anything serious,” Tonelson said. “But this is where trade trends get complicated, because these exports aren’t final goods.”

However, PVC — another heavily exported resin — might be at risk from tariff retaliation, he added, since it’s often used in the countries where it’s purchased and not sent back to the U.S. in finished form.

It’s not efficient to ship PVC pipe around the world. No one wants to pay to ship air.

But one PVC executive who spoke to PN said he wasn’t worried about such retaliation, and that interest in exported PVC has been high in early 2017.

Through the first 11 months of 2016, exports of PE and PVC from the U.S. and Canada were down slightly from their levels of full-year 2015, according to the American Chemistry Council. The amount of high density PE exported made up 22 percent of the 11-month 2016 total, down from 22.3 percent the prior full year.

In the same comparison, U.S./Canadian exports of low density PE dropped from 26 percent to 22.6 percent, and exports of linear LDPE slipped from 23.5 percent to 23.1 percent. Exports of PVC from the region also declined from 31.7 percent to 31.3 percent.

But in the long run, tariffs might be “an unlikely policy choice,” according to Harry Moser, founder and president of the Reshoring Initiative. Moser's firm helps U.S. companies with reshoring by assisting with their supply chains and other areas.

Moser — who has more than 35 years of manufacturing experience — instead advocates for a Total Cost of Ownership (TCO) approach. In a recent email to PN, Moser said that strategy looks at elements other than price and would result in greater demand for U.S.-made products, which then would lead to U.S. job growth.