Chinese retaliatory tariffs put 55,000 American jobs, $18bn in domestic activity at risk

Punitive measures imposed on China as a result of the US Section 301 investigation have incited retaliatory tariffs on $11bn in the US chemicals and plastics exports and put nearly 55,000 American jobs and $18bn in domestic activity at risk as a result of reduced demand for those products, according to new economic report published by the American Chemistry Council (ACC).

In this file photo, US President Donald Trump and US First Lady Melania Trump pose with Chinese President Xi Jinping and his wife, Peng Liyuan, on 6 April 6 2017, at the entrance of Mar-a-Lago in Palm Beach, Florida, US. (Official White House photo by D Myles Cullen).
In this file photo, US President Donald Trump and US First Lady Melania Trump pose with Chinese President Xi Jinping and his wife, Peng Liyuan, on 6 April 6 2017, at the entrance of Mar-a-Lago in Palm Beach, Florida, US. (Official White House photo by D Myles Cullen).

The release of the new data coincides with ACC’s filing of public comments on the US ‘List 3’ and follows on the heels of testimony given in August by ACC director of international trade, Ed Brzytwa, in which ACC called on policymakers to remove all 1,505 chemicals and plastics products, valued at $16.4bn, from List 3.

It is unavoidable that China’s tariffs on the US chemicals and plastics exports will result in reduced demand for those exports,” said Emily Sanchez, ACC director of economics and data analytics and chief author of the new report.

“Depending on the elasticity of demand for the US products in China, the retaliatory tariffs could result in substantial losses for American producers, their employees, and for the communities that depend on the economic activity that workers in the chemicals and plastics industry generate.”

ACC’s analysis presents two potential scenarios: a ‘baseline case’, in which Chinese importers are more challenged to find alternative sources to the US products; and a ‘worst case’, where Chinese customers can more readily adjust their supply chains to substitute for the US-sourced goods.

In the baseline case, ACC estimates that the loss in the US chemicals and plastics exports to China would be equivalent to $1.6bn annually. Losses to the US chemical and plastics exports could reach as high as $6.1bn annually under a worst-case scenario, according to ACC.

“If numbers are the universal language, then there should be no language barrier preventing the US and China from understanding the damage that tariffs are ready to inflict on one another’s economies,” Brzytwa said.

“Both sides have proven that they have the other’s most thriving domestic industries, like chemicals, in their crosshairs. Now, it is time for the US and China to steer this trade war to a sensible, productive, and stable conclusion. For China’s part, it must recognise that the path it has followed now for decades – flouting World Trade Organization principles and agreements – is no longer in its best economic interest.”

At the same time, the data also illustrate that the current US trade actions may lead to severe, unintended consequences that should not be overlooked by the Administration. “As the US Administration continues to erect costly barriers to accessing global supply chains and foreign customer markets, the Chinese government is actively working towards directing industrial capacity expansions in their own domestic economy and eliminating tariff and other barriers to doing business with other (non-US) foreign partners,” Sanchez noted.

“The loss in demand due to retaliatory tariffs on the US chemical exports to China will reduce the competitiveness of chemical manufacturers in the US and, as a result, output and job losses in the chemical industry will accrue due to lost demand for chemistry. This lost manufacturing activity will be felt upstream as suppliers to the industry face reduced demand for their output and it will be felt in the local communities where workers spend their wages,” Sanchez added.

To that point, ACC’s public comments on List 3 also include a growing list of 21 first-hand accounts from companies exposed to the potentially damaging impacts from the Administration’s China Section 301 tariffs and Section 232 tariffs and quotas on steel and aluminium imports. The anecdotes forebode significant disruptions to supply chain operations – incentivising companies to move US production overseas due to the sudden, uneven playing field that tariffs would create in the global marketplace.

A trade war will neither achieve a more balanced trading relationship between the US and China nor advance the interests of the US economy, manufacturers, and consumers,” Brzytwa reiterated.

“We strongly urge the US government to avoid this action, rescind the tariffs currently in effect, and therefore pre-empt additional retaliation by China.”

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