Tariff talk dominates Chinaplas discussions

Shanghai — With trade tensions rising between the U.S. and China — and the possibility of each country slapping sizable tariffs on large parts of their trade in plastics — there was, as you might expect, a lot of concern on the floor of Chinaplas.

"If the trade war really starts, we'll be impacted negatively," said Cui Xiaojun, China CEO for German machinery maker KraussMaffei Group GmbH. "We are getting prepared. But, as you know, this is all discussions. Nothing has happened so far."

Showgoers, particularly those with strong China-U.S. connections, expressed worry about business disruptions from all the talk of trade wars. But most interviewed at the fair, held April 24-27 in Shanghai, were also holding out hope for a more amicable resolution.

Keith Boss, CEO Americas for China's Guangzhou Tech-Long Packaging Machinery Co. Ltd., said his company has made a substantial commitment to the U.S. market since 2012 and "has come too far to turn away."

"We'll just have to weather the storm if it happens," he said. "I believe this is a negotiation. In the end, what gets resolved will be less bad than what is presented today."

That could be what happens. President Trump said April 24 he's sending four senior aides to China in early May to keep negotiating.

But on the other hand, the tariffs and counter-tariffs outlined so far by Washington and Beijing could reshape the market in important ways.

The U.S. government in early April threatened 25 percent tariffs against a 58-page list of products, including many types of Chinese-made plastics machinery — injection presses, blow molding machines, extruders and thermoformers — along with molds.

China had a surplus with the U.S. in 2016 in plastics machinery ($212 million), molds ($375 million) and plastics products ($12.3 billion).

China, for its part, responded by threatening tariffs against many types of U.S.-made resin, where American companies had a $2.7 billion surplus with China in 2016.

About 40 percent of the products targeted in China's retaliatory tariffs were chemical or plastics materials, according to the American Chemistry Council.

In general, the mood among executives at the show was anti-tariff, as you'd expect at a large, globally oriented trade show.

"If there's a trade war, the entire plastics machinery industry will be affected," said Zhu Kangjian, CEO of Guangzhou-based injection machine maker Borch Machinery Co. Ltd. and a leader of the China Plastics Machinery Industry Association.

"It's bad for all parties," he said. "If there were a lot of plastic machinery manufacturers in the U.S., then I could understand the logic of this from a protectionist standpoint."

But with many U.S. molders already using imported machines, higher costs from tariffs will be born by U.S. consumers, he said.

But some see advantages. The Italian machinery association Amaplast put out a statement April 26 saying it sees opportunities if 25 percent tariffs are put on Chinese machinery.

"U.S. production is not sufficient to meet domestic demand," Amaplast said. "The void created by reduced importation from China could be exploited by Italian companies to increase their own sales."

At Chinaplas, most executives, including Zhu, expressed hope that Beijing and Washington would ultimately step back.

Freeman Tang, CEO of Hong Kong-based machinery maker Cosmos Machinery Co. Ltd., said his company does not export much to the United States directly, but was concerned his Chinese customers would be impacted.

"From what we can see on the list, the products hit with tariffs are mainly parts or components, so it doesn't affect our customers that much," Tang said. "But I can already sense the confidence of our customers in various industries, and their confidence in investing has already had some impact."

"I'm less optimistic about the second half of this year compared to last year," he said.

Christian Kohlpaintner, a member of the executive committee of Swiss specialty chemicals maker Clariant International Ltd., made a similar point.

The company does business in 52 countries and is still assessing potential impacts. But he said talk of tariffs and trade conflicts could be shaking business confidence.

"This discussion will have more of an impact in the general business sentiment," he said. "People are a little more uncertain what is going to happen."

Privately, some Chinese executives headed for NPE2018 said potential tariffs are causing them to take a close look at business plans.

Others, however, reiterated a commitment to the U.S. market.

"We're an honest company that works to global standards," said Boss, of Tech Long. "Our plan B is to stay in the market and price in a competitive way. … If that means adjusting our pricing, hopefully it's not a long-term situation."

Most machinery in Tech Long's segment, for beverage or liquid packaging, is not made in the United States. We're selling against the Europeans," he said.

In the end, Stephen Chung, executive director and group chief officer for strategy, sales and marketing at Hong Kong-based machinery maker Chen Hsong Holdings Ltd., expressed the sentiments of many at the fair when he said he hopes a full-blown trade war can be avoided.

"Trump does a lot of talk," Chung said. "Whether it's going to boil over into actual action that has consequences and costs remains to be seen."

How will the steel and aluminum tariffs impact U.S. toolmakers? It's complicated.