How Trade War Between China and U.S. Impacts Plastic Industry?

On March 22, President Donald Trump signed a presidential memorandum that could impose tariffs on up to $60 billion of imports from China. On the same day, China indicated that it was going to suspend substantially equal concessions and other obligations to the U.S., that is, impose duties on some products imported from the U.S., so as to balance the loss of benefits caused by the 232 measures of the U.S. Trade war between China and the U.S. is growing, how will the plastic industry be affected?

China’s import dependence ratio for PE was over 40% in 2017. Major import origins were the Middle East, South Korea and Taiwan Area. The export volume was negligible. If the trade war starts, the direct impact on PE is that China imports polyethylene from the U.S. However, the U.S. is not the major importer to China. If China fights back, the imports from the U.S. are very likely to be replaced by other countries.

From the indirect impact, PE and PP are widely used in plastic packaging. The import and export goods need to be packed and used in plastic packaging products. Therefore, once the trade war obviously affects the total volume of imports and exports, the demand for PE and PP will be affected to some extent.

The downstream industries of ABS and PS include electronics, toys, automobiles, etc. The exports to the U.S. may be affected, thus the procurement of feedstock ABS and PS may be suppressed.

At present, the trade war is limited to just a few products, with limited impact on plastic industry. In the short term, the plastic industry may be hit by the panic sentiment in the market, but then it will recover. In the long term, once the trade war starts, if it is fail to achieve the expected political purpose, whether the trade war will escalate will be a potential threat. If the trade war is upgraded, the impact will also expand.