The trade war between the US and China which has escalated to the point where punitive tariffs are being levied on goods valued at USD 50 bn, could heat up further. The US government has announced that it is examining a 10% customs duty on additional imports from China, totalling USD 200 bn. This could come into force in about two months' time.
The American Chemistry Council (ACC) is concerned this move would have a substantial impact on petrochemicals and the plastics industry. This is because the list includes the feedstocks needed to produce many types of plastics, such as olefins (ethylene, propylene and butadiene) and aromatics (benzene, xylene and toluene) as well as other key substances like chlorine and MEG.
The ACC says the announcement marks a "stunning and unfortunate development for US manufacturers and consumers." Unilateral measures that alienate established trading partners and isolate the US from world trade are "very unlikely to change China’s unfair practices." The chemical industry - which, according to the ACC, is directly or indirectly linked to 96% of all manufactured goods – clearly benefits from productive trade relations with China. The association urges the US administration to "create a strong, multilateral coalition to bring an end to this unnecessary trade war."
The backdrop to this plea is the major investments made in US petrochemicals and plastics production over the past few years. Considerable portions of new PE volumes that are just going on stream are destined for China. With the planned US measures, the Chinese can be expected to launch immediate countermeasures to thwart US plans. That would undoubtedly lead to turbulence on the global market, including in Europe, since trade flows would be subject to major changes. Players on the PET market are starting to experience what this can mean, since the flow of goods has undergone an abrupt change there too, albeit for different reasons.