Chemical, manufacturing groups oppose US tariff hike

Washington — The U.S. government followed through on plans to raise tariffs May 10 on $200 billion worth of imports from China, but the decision is drawing opposition from chemical and manufacturing industry trade groups.

Talks between Washington and Beijing were continuing at press time, as the American Chemistry Council and the National Association of Manufacturers urged a solution to trade disputes without using tariffs.

In a statement before the tariffs went up, ACC said that “the risks of continuing to use tariffs as a negotiating tactic with China are simply too high — and any potential benefits still unclear.”

NAM urged negotiators to “accelerate their efforts to reach a lasting agreement that ends China's unfair practices, eliminates tariffs and provides real enforcement.”

President Donald Trump raised tariffs on $200 billion in imports to 25 percent from what had been 10 percent. The administration said the higher tariffs only apply to goods shipped on or after May 10, not products in transit.

The U.S. government, in a May 8 announcement, said it was hiking tariffs because “in the most recent negotiations, China has chosen to retreat from specific commitments agreed to in earlier rounds.”

Washington has sought what it calls “structural changes” in China's economy on issues like forced technology transfer, intellectual property protection and cyberspace.

A spokesman for China's Foreign Ministry told reporters that Beijing has “good faith” in continuing talks and that “raising tariffs won't resolve any problem.” It said it hoped that the U.S. “can work with China to meet each other halfway.”

The tariffs on $200 billion in imports from China were first imposed last year, in the largest of several rounds of U.S tariffs. ACC estimates that total U.S. tariffs on $250 billion in Chinese imports thus far include more than $15 billion in chemicals and plastics.

ACC said Beijing's retaliation to those tariffs has also hit nearly $11 billion in U.S. chemical and plastics exports to China and have put 55,000 America jobs and $18 billion in U.S. economic activity at risk.

ACC President and CEO Cal Dooley said in a statement that China is the third-largest export market for the U.S. chemical industry, and that the trade war is hurting the industry. Beijing has said it will respond to the U.S. tariffs but did not give specifics.

“We are starting to see signs that the tariffs are disrupting supply chains, cutting off markets, and eroding U.S. chemical manufacturing competitiveness,” Dooley said. “Although chemical imports from China grew by 22.7 percent in 2018, the retaliatory tariffs significantly dampened U.S. chemical exports to China, resulting in only a 2.7 percent increase in 2018 — nearly tripling the chemicals trade deficit, from $1.4 billion to $4.0 billion.”

Dooley said that the U.S. chemical sector, including plastics materials makers, prefer other solutions to trade problems with China, rather than tariffs and counter-tariffs.

“Future growth for our industry depends on a strong trading relationship with China and a trade policy that creates certainty and predictability for investors, not a looming threat of more or higher tariffs,” Dooley said.

The Society of Chemical Manufacturers & Affiliates said in a statement that raising the tariffs to 25 percent will “disproportionately burden specialty chemical manufacturers,” in part because the industry is very globally integrated.

It said that “in many cases China is the sole supplier of raw materials and building block chemicals” and noted that nearly half of the products removed from the initial U.S. tariff list after industry petitions were chemicals. Companies can continue to file those petitions.

“These sectors are thriving but cannot continue to sustain the volatility introduced by these actions,” said Jennifer Abril, SOCMA president and CEO.

This $200 billion round of tariffs also includes duties on some categories of plastic products, including vinyl flooring and some types of plastic packaging and closures. U.S. packaging maker Pactiv LLC had lobbied for tariffs.

Several large U.S. makers of vinyl flooring had urged Washington to impose the tariffs, saying it would benefit investment in U.S. factories. But other companies and importers argued it would raise home construction costs.

These are not the only tariffs on plastics industry goods. Tariffs on Chinese made injection molding machines, also at 25 percent, were imposed in an earlier round of tariffs last year.

The $200 billion at issue now first were imposed in September. Originally, the 10 percent duties were supposed to rise to 25 percent on Jan. 1 but that had been delayed while talks continued.

As well, 25 percent tariffs on Chinese-made injection molds, first imposed in July, were lifted in January after protests from U.S. mold buyers.

The U.S. traditionally maintains trade deficits with China in plastics products, machinery and molds, and has a surplus in resins. In 2017, the resin surplus was $2.9 billion, while the product deficit was $13.6 billion.

Trump also threatened in comments on Twitter to impose tariffs on the remaining Chinese imports, estimated at $325 billion.