Chemicals held hostage in China-U.S. trade spat

Groups representing the U.S. chemical industry are expressing alarm at the potential impact of a trade war between the U.S. and China. The two countries have both proposed lists of goods, each worth $50 billion annually, that will be subject to a 25% import tax if trade negotiations fail in the coming months.

“China is one of the U.S. chemical industry’s most important trading partners, importing 11%, or $3.2 billion, of all U.S. plastics in 2017,” said Cal Dooley, CEO of the American Chemistry Council, which represents large chemical firms. “We are particularly concerned that 40% of the products to which China has assigned new tariffs are chemicals.”

The Society of Chemical Manufacturers & Associates (SOCMA), a trade group for specialty chemical producers, also expressed concern. “Many of the proposed targeted products will impact the business of specialty chemistry, from vital upstream building-block materials to the dozens of downstream market segments,” CEO Jennifer Abril said. SOCMA members will be doubly burdened, Abril noted, by paying more for Chinese inputs while also facing import taxes when selling in China.

Released first, the U.S. list of targets contains 1,300 items, many of them relatively obscure. The U.S. Trade Representative explained that it selected goods benefiting from Chinese government support but excluded ones that would disrupt the U.S. economy or harm consumers.

Much narrower, with 106 items, the list of retaliatory tariffs proposed by China includes immediately recognizable goods like cars, airplanes, and soybeans. The chemicals targeted are also major ones, such as low-density polyethylene, other large-volume polymers, the fiber intermediate acrylonitrile, adhesives, and catalysts.

Analysts at the investment firm Jefferies said the tariffs, if implemented, would not necessarily cause major harm to U.S. chemical firms because many have production facilities in China.