Major Capital Projects & Industry Jobs Threatened by “Trade War”

by Duane Nichols on July 15, 2018

Senators Toomey & Corker have questions

Trade war creates risk to major capex projects and industry jobs

From an Article by Heather Doyle, PetroChemical Update, July 12, 2018

Hundreds of billions of dollars’ worth of projects and jobs in the U.S. chemical industry are at risk as a result of a massive new round of U.S. tariffs released late July 10 and covering $200 billion worth of Chinese imports, trade groups warned.

There are 325 manufacturing projects under way in the U.S., representing an investment of more than $194 billion. If these projects are delayed or canceled, the 460,000 jobs they generated will disappear, the American Chemistry Council (ACC) said.

The U.S. listed $200 billion worth of additional products it intends to place tariffs on as soon as September.

The move comes just days after the two countries imposed tit-for-tat tariffs of $34 billion on each other’s goods.

Chemicals and Petrochemicals

The public will have almost two months to comment on the list of new tariffs -to be imposed of 10%-before they come into effect. Hearings are expected to be held August 20-23.

The list names more than 6,000 items including food products, petrochemicals, paints and coatings, adhesives, automobile parts and consumer items such as luggage and fabric. Railroads, trucks and vessels that move these goods would also feel the loss of business.

More than 100 types of plastic products, petrochemicals, crude oil and gases, are included in the new round.

“The total value of U.S. chemicals and plastics exports impacted by the president’s unilateral actions on trade is now $9 billion and rising. The chemical manufacturing industry is still poised for unprecedented growth and job creation as more than $194 billion in new chemical industry investment comes online, but U.S. officials must first do everything in their power to stop the bleeding,” ACC President Cal Dooley said.

The new list includes several industrial chemicals such as olefins, aromatics, alcohols, acetyls, acrylics, anhydrides, glycols and glycol ethers. Fertilizers and surfactants are included as well as caustic soda and titanium dioxide.

US Trade Representative response

“For over a year, the Trump Administration has patiently urged China to stop its unfair practices, open its market, and engage in true market competition. We have been very clear and detailed regarding the specific changes China should undertake,” U.S. Trade Representative (USTR) Robert Lighthizer said in a statement. “Unfortunately, China has not changed its behavior – behavior that puts the future of the U.S. economy at risk.”

The USTR statement went on to say that the proposed list is needed to increase the pressure on China to change what the U.S. calls unfair trade practices.

American Chemistry Council disagrees

But the U.S. action drew an immediate reaction from the American Chemistry Council (ACC), urging President Donald Trump to bring an end to the trade war.

“The administration’s announcement…is a stunning and unfortunate development for U.S. manufacturers and consumers,”

ACC said in a July 11 statement. “Unilateral actions that alienate long-standing U.S. allies and close off the U.S. market to the rest of the world are not a recipe for economic growth and prosperity and are very unlikely to change China’s unfair practices.”

Industry trade groups warned that if the trade war continues to escalate, millions of dollars’ worth of projects and hundreds of thousands of jobs in the U.S. chemical industry will be at stake.

Other trade groups join the ACC

The ACC, joined with the American Petroleum Institute and the Association of American Railroads published a commentary in the Washington Examiner denouncing the new tariffs.

The U.S. has already imposed 25% tariffs on several Chinese products, most of which are machines and industrial tools.

The 25% tariff on steel is of concern because construction of new chemical and plant construction requires such massive amounts of the material, the groups said.

In many cases, the specialty steel and aluminum components the industry needs are not produced in the U.S.

Industry Jobs and Capital Projects

“Since 2010, more than $194 billion of new chemical industry investment has been announced. Steel tariffs threaten around half of that — jeopardizing construction on job-creating projects because companies cannot procure the products they need in sufficient time. Steel tariffs also hurt America’s railroads, with 140,000 miles that make up a steel network across the nation,” the trade groups said.

U.S. chemical companies have been warning for months that the trade war could damage their business at home and abroad. The new taxes cover a wide swath of chemicals and materials U.S. manufacturers import from China.

Pre-tariffs, the private sector was poised to invest $1.34 trillion in energy infrastructure to keep pace with surging production, supporting more than 1 million jobs each year on average through 2035.

“Tariffs could stifle hundreds of billions of dollars’ worth of projects — including new pipeline infrastructure needed to get oil and natural gas from the prolific Permian Basin to markets. The steel tariffs alone could increase the cost of a 280-mile pipeline by as much as $76 million,” the groups warned.

House of Representative companion bill

Companion legislation has been introduced by Rep. Mike Gallagher (R-WI) and five bipartisan co-sponsors that mirror a Senate bill spearheaded by Sen. Bob Corker (R-TN) and Sen. Pat Toomey (R-PA) to require congressional approval of Section 232 tariff increases.

The legislation would require President Trump to gain congressionional approval before he could impose tariffs “in the interest of national security.”

“Congressional leaders deserve an opportunity to review any and all tariff increases that have the potential to derail U.S. manufacturing and hurt our economy,” Dooley said.

“ACC and our members were among the very first business groups to support the Corker-Toomey bill, and we extend our strong support to Rep. Gallagher and Reps. Kind, Sanford, Panetta, Lance, and Costello for their bipartisan effort to bring more dialogue and congressional engagement to U.S. trade policy.”

China response to round of tariffs

China is threatening to retaliate against U.S.-made chemical exports valued at $5.4 billion.

“China’s tariffs will hit the U.S. chemical industry not once, but twice by closing China’s market both to chemical exports and exports of finished products using chemicals in their production, including agricultural goods and automobiles,” the groups wrote.

The tariffs on downstream products could lead to less demand for those products and therefore less demand for U.S.-made chemicals.

“As an industry that touches 96% of all manufactured goods and which has much to gain from a productive, respectful trading relationship with China, ACC and our members remain hopeful that the U.S. and China can resolve their differences and prevent further harm to U.S. manufacturers, farmers, and consumers. We strongly urge the Administration to create a strong, multilateral coalition to bring an end to this unnecessary trade war,” the ACC said.

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See also: WV Governor believes China Energy deal will come to fruition despite trade war with China — Gov. Justice: ‘We’re still on go 100 percent’, by Rusty Marks, WV News, July 15, 2018

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