The Phase 1 trade deal that Washington and Beijing signed this week has had minimal impact on tariffs that has affected petrochemical and plastics trade between the US and China, the American Chemistry Council said Friday.
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"For US chemical manufacturers, this deal keeps costs high by maintaining existing tariffs in the United States and keeps the China market closed to our exports," ACC President and CEO Chris Jahn said in a statement.
While the deal will reduce tariffs on September 2019 chemicals and plastics imports from China to 7.5% from 15% in mid-February, 25% tariffs imposed in August and September 2018 on Chinese goods including pipes, containers, machinery, tires, rainwear, flooring remain in place.
In addition, China will not lift tariffs on US goods imposed in response to those 2018 tariffs, including hundreds of US-origin resins and raw materials.
"We strongly urge President Trump to follow through on his commitment to remove these tariffs as part of a Phase 2 agreement," Jahn said.
TARIFFS AFFECT MUCH NEW US PETROCHEMICAL CAPACITY
Cheap ethane unearthed in the US natural gas shale boom prompted chemical producers to move ahead with more than $200 billion in new petrochemical infrastructure to use that feedstock advantage to turn the US into a global supplier of resins and raw materials.
From 2017 through the 2020s, the US has brought or will bring online 13.67 million mt/year of new polyethylene capacity, and 18.5 million mt/year of new ethylene capacity to feed that new PE production as well as other petrochemicals.
Asia, led by China and India, are the top demand centers for polyethylene through 2029, according to S&P Global Analytics.
PE is used to manufacture the world's most-used plastics, from shampoo bottles and coolers to pails, food storage containers, shrink wrap, trash bags and milk jugs.
But China's tariffs on US goods imposed in 2018 in response to US tariffs on Chinese products include two types of PE — high density PE and linear low density PE — which make up more than 90% of new US production along the US Gulf Coast, Pennsylvania and Ohio.
Late last year, China lifted its tariffs on specialty types of HDPE and LLDPE, but those types make up a very small portion of the whole, leaving minimal relief, according to the ACC. The same goes for Chinese tariffs lifted on a specialty type of polypropylene, another resin heavily used for plastics in vehicles, carpets, and other products.
While the ACC said China's commitments to alter practices regarding US intellectual property and forced technology transfers from US companies that operate there, the organization "still has significant concerns about the maintenance of existing additional tariffs on both sides."