Washington — The resin sector seems to have escaped — for now — the escalating trade conflict between the United States and China, as China is temporarily delaying tariffs on exports of U.S.-made plastics materials.
But it could be a very temporary reprieve. Resins definitely remain on both countries' radars for possible next phases of their trade conflict.
The first round of tariffs between the two countries kick off July 6 and include 25 percent duties on Chinese-made plastics machinery and molds, but Beijing and Washington have shifted plastic materials into a second round of tariffs, with an as yet unspecified start date.
That shift, however, is not bringing any substantial relief to the American Chemistry Council, which is growing more concerned over trade and said some of its members are actively studying whether escalating tariff conflicts, with China and other countries, could force production offshore.
"Clearly we're concerned about the overall trend line of U.S. trade policy, particularly the amount of retaliation our industry is experiencing now or will experience," said Edward Brzytwa, director of international trade for the Washington-based association. "The nugget of good news is that we're not subject to the first round."
But the new, second round of tariffs could wind up hitting harder, he said, since they increased the amount of duties that could be assessed on plastics. The U.S. in mid-June added imports of Chinese resins to its list of 25 percent punitive tariffs for the first time, he said.
"The bad news is the amount of trade ... with respect to chemicals and plastics went up significantly," Brzytwa said.
The July 6 tariffs on the U.S. side include many categories of Chinese plastics machinery and molds, putting an additional 25 percent tariff on more than 800 items covering $34 billion in Chinese goods. The Trump administration says the tariffs are needed to get China to change unfair trade practices.
The tariffs, first announced in April, drew a retaliation from China that had threatened 25 percent tariffs on an estimated $3 billion in U.S. plastic exports to China, the world's largest importer of resin, starting July 6.
But after the United States in mid-June trimmed back its original April list from $50 billion in Chinese imports to $34 billion, China put resins on its second round of tariffs. The Chinese tariffs that kick off July 6 cover about $30 billion in U.S. exports, mostly agriculture and automobiles.
The two countries are now holding about $15 billion to $16 billion in goods in reserve for a second round of tariffs. The Trump administration plans a hearing July 24 on its second round, with a decision later.
"I don't know how long of a delay it really is; it's hard to say," Brzytwa said. "It seems like they're going to move really quickly."
Beyond the China tariffs, the bigger picture has ACC equally or more concerned, he said.
The group lobbied, unsuccessfully, against steel and aluminum tariffs, arguing they would raise prices for building factories in the current shale gas-led petrochemical investment boom.
ACC also argued against Trump's proposed 20 percent tariffs on imported cars, arguing that it would decrease U.S. demand and invite retaliation on U.S. chemical exports.
And the group is concerned about Trump administration statements that it could put 10 percent tariffs on another $200 billion in Chinese imports.
"We're getting to the point where the trend line is bad and it could get much, much worse, and so we have to talk about the bigger picture in a way that really resonates with people," he said.
He said chemical manufacturers are actively considering whether they would need to shift production out of the United States to maintain their competitiveness.
That echoes public comments that Saudi Basic Industries Inc. made at a mid-May U.S. government hearing, when it said it may shift some polycarbonate manufacturing to Europe or Asia to keep its exports competitive to China, the world's largest plastics resin importer.
Other companies have said little publicly along those lines, but Brzytwa said there are active discussions.
"I think a number of our members are actively considering whether they have to move production overseas and whether they have to close facilities or delay investments," he said. "They are committed to the United States, but if the trade policy is becoming much more uncertain and their costs are going up, what are they supposed to do? They have to address that."