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SOCMA Testifies Before USTR on Proposed China Tariffs and Impact to Specialty Chemical Industry

If the proposed Section 301 China tariffs are implemented or uncertainty continues, there will be less demand for U.S.-made chemicals. Thus, the Society of Chemical Manufacturers & Affiliates (SOCMA) today asked the Administration to work with industry and World Trade Organization (WTO) trading partners to coordinate non-tariff strategies to address China’s intellectual property (IP) theft, forced technology transfers, and industrial policies that restrict U.S. commerce. 

In testimony today before officials from the Office of the United States Trade Representative (USTR), SOCMA voiced such concerns regarding the proposed tariffs and potential impact to the specialty chemical industry.  

The Association is concerned the proposed 25 percent duty on products in the Annex to the Federal Register Notice could have a negative effect on U.S. specialty chemical manufacturing because: 

  1. Certain listed intermediate chemicals are produced exclusively in China; 
  2. Specialty chemical supply chain modification is particularly burdensome; and most importantly,
  3. 40 percent of China’s proposed retaliatory list targets chemicals.  

While several of the 1,333 products on the proposed U.S. list implicate chemicals, some are chemical intermediates produced exclusively in China. Therefore, if tariffs are implemented, costs to specialty chemical manufacturers that rely on those inputs could escalate to levels that render domestic manufacturing uncompetitive and, in other instances, halt or greatly increase the cost of manufacturing for life-saving pharmaceuticals and other specialty chemicals in the United States – adversely affecting the Administration’s recently announced plan to curb drug prices. 

Forty percent of China’s proposed retaliatory list targets chemicals – this is SOCMA’s foremost concern. American chemical manufacturers are the top exporting industry in the U.S., accounting for $181 billion in 2017, or 14 percent of all U.S. exports. Also, 30 percent of the more than 800,000 jobs in the U.S. chemical industry are export-dependent. 

While specialty chemicals are a sector of this vital industry, our members make products that improve downstream manufacturing. In fact, more than 96 percent of manufactured goods are touched in one way or another by chemistry. Given the chemical industry’s heterogeneity, we urge the Administration to consider the compound effects to the specialty chemical industry and its many downstream manufacturing sectors.

These duties, if applied, would cause disproportionate economic harm to U.S. interests, including small and medium-sized specialty chemical manufacturers Thus, if the 301 list is implemented, before implementation, SOCMA today urged USTR to work with the U.S. International Trade Commission (USITC) and U.S. Customs, to identify individual chemical products contained in many of the listed basket categories, and then reach out to consumers of such products to be sure there are reasonable alternatives to China. It is a very difficult task, especially for many of the smaller companies SOCMA represents, to cross-reference Harmonized Tariff Schedule (HTS) numbers on the 301 list with chemicals that companies are purchasing.

The specialty chemical industry saw terrific growth in 2017 and projects further growth in 2018. Threats of tariffs and retaliation have already adversely affected domestic industries. Markets, and particularly international markets, disfavor uncertainty. Tariffs inject uncertainty and will continue to shift sourcing away from the U.S. 

The stakes are high as the Administration considers implementation. Today kicks off two days of high-level U.S.-China trade and investment talks at the Treasury Department. SOCMA is happy to see that the Administration has begun what SOCMA hopes are constructive and sustained negotiations to improve the manufacturing competitiveness of the chemicals trade – an industry that is particularly apt to grow economies and reestablish trust in our societies.

For more information on how China tariffs and retaliation may impact the specialty and fine chemicals industry, contact me at moedritzerm@socma.com.

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