US energy, farming, plastics firms braced for second wave of tariffs

An oil well in North Dakota, US, where energy, agricultural and chemicals companies in the country are ready for a summer standoff over trade as Washington imposes the next round of tariffs on Chinese goods.
An oil well in North Dakota, US, where energy, agricultural and chemicals companies in the country are ready for a summer standoff over trade as Washington imposes the next round of tariffs on Chinese goods.PHOTO: AFP

HOUSTON/CHICAGO • US energy, agricultural and chemicals companies are girding themselves for a summer stand-off over trade as three months of rhetoric became reality yesterday.

The US imposed the first duties on US$34 billion (S$46 billion) in Chinese goods at 12.01am yesterday in Washington, just after mid-day in China. Beijing retaliated at once.

US Customs officials will begin collecting an additional 25 per cent tariff on imports from China of goods ranging from farming ploughs to semiconductors and airplane parts.

China has said it would respond by imposing higher levies on an equivalent amount of goods ranging from American soya beans to cars, which may in turn prompt US President Donald Trump to raise trade barriers even higher.

Industry lobbying efforts have failed to convince the Trump administration to put off the 25 per cent tariffs. Earlier this year, the United States levied tariffs on steel and aluminium from China and elsewhere.

Lobbying efforts are now focused on convincing Mr Trump not to put tariffs on a second list of mainly energy, plastics and chemicals goods worth about US$16 billion, said industry officials. Some businesses have tried to persuade the Trump administration to back down by saying they would be left with no choice but to consider reducing production, firing workers and shifting operations out of the US to account for the added costs from import tariffs.

The American Petroleum Institute, which represents oil and gas producers, backed a Bill that would have Congress vet future tariffs proposed on national security grounds. The Bill has stalled in the Senate.

"We have had meetings with members of Congress to press the issue," said vice-president Lee Fuller of the Independent Petroleum Association of America. The oil and gas trade group is requesting that the administration "look at better alternatives than they have so far".

The association favours granting more tariff exclusions to products not typically made in the US, including certain speciality steel used in oil drilling.

China's list of goods facing retaliatory tariffs include US crude oil, plastics and chemicals, all industries that have expanded rapidly using abundant US shale oil and natural gas to drive exports to China.

"I put millions of dollars into equipment and infrastructure on the basis of exporting a heck of a lot more to China. I am at risk," said Mr Marc Levine, chief executive of Plantgistix, a Texas-based plastics resin blender, packager and shipper.

If China goes ahead with tariffs on US plastics, he said it "could have a very clear negative effect on resin producers and others here to support the huge increase in production - railroads, truckers, pallet manufacturers and ocean carriers".

The American Chemistry Council estimates that the second wave of promised tariffs would affect US$2.2 billion in imports of chemicals and plastics from China and US$5.4 billion in US exports to China from retaliatory duties, said Mr Ed Brzytwa, director of international trade at the council. Chinese retaliatory tariffs, if imposed, "are direct hits" on recent production expansions, he said.

"If those come into effect, we will have to close down plants, and jobs will be at issue," he added.

Agriculture lobbyists are resigned to tariffs from China, the largest buyer of US agriculture commodities, after the imposition of tariffs earlier this week by the European Union, Canada and Mexico.

"We are primarily battening down the proverbial hatches... and hoping the administration will throw that Hail Mary for us," said Ms Wendy Brannen, spokesman for the American Soybean Association.

REUTERS, WASHINGTON POST, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 07, 2018, with the headline 'US energy, farming, plastics firms braced for second wave of tariffs'. Print Edition | Subscribe