What does the US-China trade deal mean for the plastics industry?

The US and China have made a step towards ending their trade war by signing the first phase of a trade agreement that could help ease the pressure on the global economy.

In the agreement, China has said it will boost US imports by $200 billion above 2017 and strengthen intellectual property rules, while the US has agreed to halve some of the tariffs it had imposed on Chinese products.

The increase in US imports from China will boost purchases of agriculture by $32 billion, manufacturing by $78 billion, energy by $52 billion, and services by $38 billion.

The US will maintain up to 25 per cent tariffs on around $360 billion worth of Chinese goods, and China is expected to maintain the majority of its new tariffs on around $100 billion worth of US products.

What have the leaders said?

Donald Trump took some time off shouting about dishwashers to talk to the media, saying: “Together we are righting the wrongs of the past and delivering a future of economic justice and security. Far beyond even this deal, it’s going to lead to an even stronger world peace.”

Official press conferences aside, we can’t even begin to get a full picture on what The Donald thinks without consulting Twitter, and for those of you that haven’t seen yet, it’s excellent news.

Trump has history on his views towards certain trade deals; you may remember him declaring the NAFTA trade deal as The Worst Trade Deal In The History Of Trade Deals, Maybe Ever, but fortunately, the US-China deal is One Of The Greatest Trade Deals Ever Made.

Chinese Vice Premier Liu He, who does not have Twitter, said: “China has developed a political system and a model of economic development that suits its natural reality.”

“That doesn’t mean that China and the US cannot work together. On the contrary, our countries share enormous common commercial interests. We hope both sides will abide by and keep the agreement in earnest.”

What has the industry said?

On a more serious note (think of this part as the @POTUS to the first part’s @realDonaldTrump), the agreement is a solid first step towards a more complete deal.

The second phase of the agreement could in theory remove all tariffs, which would provide a major boost for the global economy.

The current deal doesn’t cover aspects such as China’s Made in China 2025 initiative and issues regarding Huawei, but does offer a glimmer of hope that the trade war could be fully resolved in the future.

Tony Radoszewski, President and CEO of PLASTICS, said: “This agreement is a step in the right direction, and we hope it paves the way forward for a reduction, or elimination, in tariffs, an increase in market access, and a less adversarial relationship between the world’s two largest economies.”

“The plastics industry is an important driver of global growth and its relies on free and stable trade relationships in order to innovative and employ more workers.”

“We look forward to further negotiations that level the playing fields for US plastics companies to compete in global trade.”

Gavin Thompson, Asia Pacific Vice Chair for Wood Mackenzie, said: “With the ink now dry on the Phase 1 US-China trade deal we’ve considered what this means for energy trade between the two countries.”

“From an energy perspective, what is most notable is China’s agreement to increase energy imports from the US by up to $52.4 billion from the US over the next two years as part of a commitment to spend around $200 billion more on US goods and services than it did in 2017.”

“Let’s be clear; $52.4 billion over two years is a lot of energy. But neither the five per cent tariff on US crude oil nor the 25 per cent tariff on US LNG is to be reduced or removed by China under the Phase 1 deal.”

“For China to massively increase imports of oil and LNG from the US while tariffs remain in place is going to be challenging.”

“Consider LNG. In 2017, Chinese imports from the US were approximately 1.5 million tonnes, worth around $0.60 billion. If China is to increase the value of US LNG imports considerably as part of this agreement, let’s say to around ten million tonnes in 2021, then the 25 per cent tariff would need to be either absorbed by the importing company, or passed through to the consumer.”

“We expect that Chinese national oil companies will be reluctant to commit to large-scale purchases given this. At the same time, the next two years will also see a slower pace of gas demand growth in China, rising domestic production, and the arrival of Russian pipeline has, creating a more competitive gas market.”

“The Chinese uncontracted LNG demand is estimated to be 17 million tonnes in 2020 and 23 million tonnes in 2021, and US off-takers will now be looking to target this market.”

“Contract and portfolio suppliers with contracted supply in China and US offtake, notably Shell, BP, and Cheniere, could also target increasing volumes of US LNG within existing contracts into China if agreement can be reached with key buyers, including CNOOC and PetroChina.”