Chemicals Industry Most Deserves Removal From Section 301 List, Trade Group Says
The chemicals industry deserves to be spared from a $16 billion tranche of Section 301 tariffs, Ed Brzytwa, the director of international trade for the American Chemistry Council, said during a July 25 hearing on the tariffs. After testimony from more than a half-dozen businesses that import, manufacture or use imported chemical inputs, he explained that the U.S. chemicals industry has a cost advantage over China now because of cheap natural gas. Because China imports more than $5 billion a year in chemical compounds and plastics from the U.S., the industry's a natural target for retaliation. That -- paired with the fact that many chemical and plastic manufacturers need Chinese inputs -- means that putting chemicals on the list is doubly painful.
"This is why chemicals, arguably over any other products, do not belong on this list," he said. If the panel agrees, it would have to find about $2.2 billion in other products to replace chemicals and plastic products. He asked that they be kept off the next tranche, as well, and said that out of the next $200 billion in products set for tariffs, $16 billion worth of chemicals are represented.
On the second day of testimony in front of the interagency panel, all the witnesses asked that their products be removed from the list. As on the first day (see 1807240017), the panel's questions focused on why they couldn't buy the products from another country, or source the products domestically. Some said the product could be bought elsewhere, but it would take at least a year to switch, and cost more; some said the cost to start up production elsewhere is prohibitive; some said China is the only source for the item.
Six businesses and a trade group criticized the inclusion of cargo containers on the tariff list. Mobile Mini's general counsel, Christopher Miner, responded to a question from the panel about why he couldn't buy an old container that was not just coming out of shipping service. Miner said there aren't spares lying around, but even if there were, "the guy in Albuquerque knows I'm facing a 25 percent tariff," and will raise his price to match that cost.
Mark DePasquale, CEO of the National Portable Storage Association, said, "In my 30-year career, [shipping companies] have never purchased a shipping container outside China." Some of the businesses, like DePasquale's, buy containers that used to go on cargo ships and repurpose them as construction site offices, industrial storage, or temporary buildings for the war effort in Iraq and Afghanistan. Two massive trucking companies, JB Hunt and Schneider National Carriers, bring containers into the country because they can move from ship to train to truck seamlessly.
While the big trucking companies said the extra $64 million in tariffs for land transport would get passed along to consumers, the small companies that use containers for shipments between Hawaiian islands and that repurpose used trailers say the cost cannot be passed along, and would hurt their businesses. Containers are steel boxes, with no technology or intellectual property, and because China is the world's shop floor, a tariff will have no effect on its dominance in shipping container manufacturing, they said.
Electric bike manufacturers and wholesalers also testified against their products' inclusion. These bikes are growing in popularity as Boomers age, they said, and accounted for nearly 10 percent of wholesale sales in the first quarter of 2018. All electric-assist bicycles are made in China, they said, because the entire supply chain for bicycles is in China now. Removing electric bicycles wouldn't put much of a dent in the $16 billion target, they said, since there were only $150 million worth of electric bicycles imported last year.
Robert Burns, who has worked for Trek bicycles for more than 40 years, said back in 1995, there were still a fair number of bikes manufactured in America. Last year, there were 17 million bicycles sold in the U.S., and 200,000 were manufactured domestically. "We can't buy so much as a spoke made in America," said Donald DiCostanzo, CEO of Pedego Electric Bikes. With 90 percent of bikes made in China, the only things a 25 percent tariff on the bikes will do is depress demand for the bikes -- which cost a few thousand dollars -- or allow European companies to undercut American companies like his.