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U.S. Chemicals Industry Would Incur Double Damage Due to Loss of Key Chemical Export Markets and Reduced Export Demand for Products Made With Chemicals

WASHINGTON (May 15, 2018) – The Trump Administration is right to pursue policies that are intended to curb China’s mercantilist behavior, but they should not come at the expense of a booming U.S. chemicals industry that has attracted billions of new investment dollars and helped the U.S. become one of the leading, low-cost producers of chemicals in the world, according to American Chemistry Council (ACC) Director of International Affairs, Edward Brzytwa, who testified today before officials from the Office of the United States Trade Representative (USTR) regarding the damaging, real-world impacts of the Section 301 tariffs the U.S. has proposed against China. The U.S. chemicals industry was the country’s leading exporter in 2017, with $181 billion in exports, according to ACC analysis. The industry posted a trade surplus of $33 billion in 2017, a number that is projected to rise to as high as $73 billion by 2022.

“Enabling a retaliatory trade war will only advantage China’s growing industry at the expense of American production,” Brzytwa told policymakers at the offices of the U.S. International Trade Commission on Tuesday. “China’s tariffs will hit the U.S. chemicals industry, not once, but twice, by closing the China market both to our exports and to exports of products using chemicals in their production, including agricultural goods and autos. The tariffs on downstream products will lead to less demand for those products and therefore less demand for U.S.-made chemicals. As many as 24,000 U.S. jobs in the chemicals and downstream sectors would be lost.”

Approximately 40 percent of the products on China’s initial Section 301 list relate to chemicals, including basic chemicals, plastic resins, some specialty chemicals, and some finished forms of plastics, such as plastic films and sheets. “China is a key export market for U.S.-made chemical products,” Brzytwa noted. “That China has included these products on its tariff list is a recognition of the competitiveness of the U.S. chemicals industry and the challenge it poses to China’s own fast-growing chemicals industry.”

Similarly, around 5 percent of the 1,333 products the USTR has slated for a 25 percent tariff also relate to chemicals. “Imposing increased duties on the products in the Annex to the Federal Register Notice would not be practicable or effective to obtain the elimination of China’s acts, policies, and practices. These duties, if applied, would cause disproportionate economic harm to U.S. interests, including small and medium-sized enterprises and consumers. We urge USTR to remove these products from this list and reconsider the inclusion of so many vital inputs that U.S. manufacturers use to further their operations and support American jobs and manufacturing,” Brzytwa said.

Brzytwa shared several firsthand accounts from ACC members of the negative impacts the tariffs would have on their businesses, including causing significant disruptions to supply chain operations, incentivizing the offshoring of production, and even forcing companies to terminate production altogether due the sudden, uneven playing field that tariffs would create in the global marketplace, rendering some businesses non-competitive in once-profitable exporting markets. ACC provided additional details regarding specific member company impacts in its public comments filed with USTR on May 11.

“Our preferred pathway to solving these problems is constructive, thorough, and sustained negotiations focused on pragmatic solutions to the challenges of China’s mercantilist policies,” Brzytwa concluded. “We are pleased that the U.S. and China have begun to negotiate. We strongly urge both sides to avoid the imposition of tariffs.”

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