Tariffs on U.S. chemical exports to China, coupled with new duties on steel imports used to build plants, would undercut the economic advantage that’s fueled the industry’s unprecedented expansion. Contrary to President Donald Trump’s pledge to bring manufacturing back home, companies that expand production or build facilities outside the U.S. would reduce capital expenses while avoiding Chinese tariffs.

“Market shifts caused by tariff increases may convince investors to do business elsewhere,” said Cal Dooley, president of the American Chemistry Council trade group. Current plans for new chemical factories, expansions and restarts of facilities in the U.S. were based on the economics of existing tariffs, he said in a statement Wednesday.

China’s proposal to levy 25 percent tariffs on about $50bn of U.S. imports effectively would remove a large market for dozens of plastics and chemicals targeted by the measure. China imported $3.2bn of U.S. plastic resins last year, making the country one of the industry’s most important trading partners, Dooley said. Forty percent of the products on China’s tariffs list are chemicals such as polyethylene, PVC, polycarbonates and acrylates.

Quickly Escalating

The Wednesday announcement was retaliation against Trump’s proposals for $50bn in similar tariffs for China imports. That followed a 25 percent duty the U.S. imposed on steel imports — a move that DowDuPont Inc. already warned would add $300m to a major chemical project on the U.S. Gulf Coast.

Read full article