U.S.-China Trade War Hits Chemical Industry

  •   12 Apr 2018
  •    Ying Zhang

    In response to US president Trump’s proposed 25% tariff increase on more than 1300 types of Chinese products, China also plans to increase tariffs on US goods which includes 44 chemical products. The trade war is expected to increase the price of numerous chemical products circulating in the Chinese market.

    On 3 April 2018, The US announced that it will place a 25% tariff on $50 billion worth of Chinese-made products like flat-screen televisions, medical devices, aircraft parts, and batteries. China responded by issuing a proposed tariff list targeting more than 100 products. 44 chemical products are included, such as LPG, PC, polyethylene, acrylonitrile, lubricant, epoxy resin, etc.

    Once China’s adjustment is formally implemented the impact on China’s chemical industry will be obvious. For example, US is the dominant source of propane consumed in china, and importation of this commodity is subject to a 1% tariff (applicable to a designated favored nations and commodities list). If the new policy goes into effect, however, a 24% hike in tariffs would be imposed on propane. Currently, a large number of Chinese companies have standing contracts with US propane exporters. Increased tariffs would likely significantly impact these contracts going forward.
    As a part of the planned countermeasures, China imposed an anti-dumping duty increase from 37.5% to 75.5% on imported EG and DGBE, effective from April 12, 2018. Chemical giants like BASF (charged 18.8%), DowChemical (75.5%), EastmanChemical ( 46.9%) are on the list. EG and DGBE are materials used to produce water-based coatings, paint, and ink. Unfortunately, those furniture coating companies who already made a price adjustment earlier now face another dilemma- continuing to increase price or search for a substitute (we expect them to choose the latter).

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