The US will impose tariffs on $200bn worth of imports from China, many of which include plastics and petrochemicals, President Donald Trump said on Monday.
The tariffs will go into effect on 24 September, and they will start at 10%, Trump said. On 1 January, the tariffs will rise to 25%.
If China takes what the administration considers to be retaliatory actions, then Trump threatened another round of tariffs on $267bn worth of additional imports, he said.
China has threatened to retaliate with its own list of 5-25% tariffs on $60bn worth of imports from the US, many of which also include chemicals.
In addition, China has submitted a request to World Trade Organization (WTO) for authorisation to impose over $7bn of sanctions annually on the US.
During the past year, the US and China have placed an increasing number of tariffs on goods they import from each other, placing the chemical industry on the front line of an escalating trade war.
The American Chemistry Council (ACC) persistently opposed the tariffs, alleging they will put billions of US dollars and thousands of workers at risk.
The National Association of Chemical Distributors (NACD) recently published the results of study that it said quantified the costs of additional tariffs to distributors.
Many of the new polyethylene (PE) plants that are now starting up in the US were built with the intent of exporting much of their output. Demand in the US will unlikely grow fast enough to absorb all of this new capacity, and companies always intended to export much of the PE to fast-growing emerging economies, particularly China.
The tariffs complicate this strategy at a time when integrated margins for PE producers have been falling as new capacity starts up.
On the other hand, many executives said the tariffs will cause trade patterns to shift, but they should not cause widespread disruption. Demand for PE will continue to grow and markets will need new capacity. This is illustrated by utilisation rates, which remain high despite new plants starting up in the US.
A recent act will provide chemical companies with some relief from existing tariffs.
Trump said his administration is imposing the tariffs because of what he alleged to be unfair policies and practices involving how it treats US technology and intellectual property. He accused China of forcing US companies to transfer technology to their counterparts in the country.
The table below shows some of the chemical and plastic products covered by the $200bn list of tariffs.
