Commenting on the announcement that the US will impose a 25% tariff on $16 billion worth of Chinese goods, including chemicals and plastics, Ashish Chitalia, Wood Mackenzie Principal Analyst, said:
"The US tariff on chemicals predominantly includes lubricants, plastics resins and finished goods for pipes, tubes and fittings. The import duty on plastic resins will have a negligible impact, as the United States only imports 1.5% of polymers, such as polyethylene, polypropylene, PVC, polystyrene, and PMMA from China.
"The more significant impact will be felt in the area of plastics pipes, hoses and tubes, of which the US imports around 20% from China. The majority of plastic fittings are sourced from Mexico and Canada, accounting for more than 50% of imports. The duty on finished goods, such as plastics pipes, hoses and tubes, would result in higher delivery costs and force buyers to find alternative sources. As the date for this round of tariffs has been announced, buyers are already stocking their inventories before the duty takes effect on 23rd August.
"If tariffs are sustained for the longer term, buyers will be compelled to reposition trade for overall cost savings. A continued tariff makes the investment environment uncertain for petrochemical/plastics producing companies and for finished goods manufacturing firms.
"Both China and the US have been investing multi-billion dollars in the petrochemical and plastics space in the last decade and are likely to continue doing so for the next decade. However, risk assessments are becoming increasingly challenging due to the uncertainty around the tariffs and their impact on commodity prices, logistics, supply chain and currencies."