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U.S., China, each disclose new tariff proposals

Escalation of trade war would affect some critical materials, including rare earths

by Jean-François Tremblay
August 7, 2018


A new hit

Latest round of proposed tariffs would hit chemicals critical to industry or traded in large volumes.

New U.S. tariffs would affect:

Hexamethylene diisocyanate
Rare earth metals, scandium, and yttrium
Synthetic silica gel
Sodium nitrite and other nitrates

New Chinese tariffs would affect:

Potassium cyanide and other cyanides
Vinyl acetate

Note: 25% tariffs proposed for listed chemicals.
Sources: U.S. Trade Representative and China Ministry of Commerce

As the U.S. and China escalate hostilities in their trade war, the manufacturing sector on both sides is at risk of becoming collateral damage. New tariff proposals unveiled by the U.S. and China in recent days cover many chemicals and key materials that the two countries trade widely and for which, in some cases, few alternative suppliers exist.

Acting on a request from President Trump, the office of the U.S. Trade Representative—the equivalent of the ministry of international trade in other countries—raised from 10% to 25% the custom duties proposed on $200 billion worth of goods that the U.S. imports from China. The U.S. started levying tariffs on Chinese goods this summer in an effort to prompt China to modify business practices that the U.S. deems unfair.

USTR also unveiled a list recently of Chinese goods worth $16 billion in total that will be subject to a 25% import tax beginning August 23. Containing many chemicals, the list was finalized after a public hearing in July. In early July, the U.S. started levying a 25% tax on $34 billion worth of Chinese goods.

The American Chemistry Council, the main industry group representing the chemical industry, says the new round of proposed U.S. tariffs would be “devastating for U.S. chemicals manufacturers.” It notes that more than $16 billion of the $200 billion in targeted goods are chemicals. “Small and medium-sized enterprises in particular are at risk of being put out of businesses by a cost increase of that kind.”

The proposed U.S. tariffs target chemicals and materials for which few alternatives exist. For instance USTR intends to introduce a 25% levy on rare earths, key materials that are mostly produced in China. In 2012, after China introduced export restrictions on rare earths, the U.S., the EU, and Japan complained to the World Trade Organization. USTR also plans to slap a 25% import tax on Chinese hexamethylene diisocyanate, a specialty chemical that very few companies worldwide can make.

In retaliation, China set as August 23 the date when it will start imposing a 25% tax on $16 billion worth of U.S. items. China also unveiled proposed tariffs on $60 billion worth of other goods. The two lists contain high-volume chemicals like polypropylene, polyethylene, and p-xylene.

UPDATE: This story was changed on Aug. 10, 2018, to add new information about the timeline of development of the U.S.’s tariffs and about the effective date of the U.S.’s and China’s tariffs.


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