USA/China: Trade War Report Projects Potential Job and Economic Losses Caused by US-China Trade War

Editor: Alexander Stark

Retaliatory Tariffs on $ 11 billion in US chemicals and plastics exports could put 55,000 US jobs and $ 18 billion in US economic activity at risk, the American Chemistry Council says.

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The trade war with China could put 55,000 US jobs and $ 18 billion in US economic activity at risk, ACC report says.
The trade war with China could put 55,000 US jobs and $ 18 billion in US economic activity at risk, ACC report says.
(Source: Pixabay / CC0 )

Washington/USA — Punitive measures imposed on China as a result of the US Section 301 investigation have incited retaliatory tariffs on $ 11 billion in US chemicals and plastics exports and put nearly 55,000 American jobs and $ 18 billion in domestic activity at risk as a result of reduced demand for those products, according to new economic report published today by the American Chemistry Council (ACC). The release of the new data coincides with the council's filing of public comments on US ‘List 3’ and follows on the heels of testimony given in August by ACC Director of International Trade, Ed Brzytwa, in which ACC called on policymakers to remove all 1,505 chemicals and plastics products, valued at $ 16.4 billion, from List 3.

According to Emily Sanchez, ACC director of economics and data analytics and chief author of the new report, it was unavoidable that China’s tariffs on US chemicals and plastics exports would result in reduced demand for those exports. Depending on the elasticity of demand for US products in China, the retaliatory tariffs could result in substantial losses for American producers, their employees, and for the communities that depend on the economic activity that workers in the chemicals and plastics industry generate, she added.

Losses of Up to $ 6.1 billion

ACC’s analysis presents two potential scenarios: a “baseline case,” in which Chinese importers are more challenged to find alternative sources to US products; and a “worst case,” where Chinese customers can more readily adjust their supply chains to substitute for US-sourced goods. In the baseline case, ACC estimates that the loss in US chemicals and plastics exports to China would be equivalent to $ 1.6 billion annually. Losses to US chemical and plastics exports could reach as high as $ 6.1 billion annually under a worst-case scenario, according to ACC.

Ed Brzytwa states that both sides had proven that they have the other’s most thriving domestic industries, like chemicals, in their crosshairs. Now, it was time for the US and China to steer this trade war to a sensible, productive, and stable conclusion. For China’s part, it had to recognize that the path it has followed now for decades — flouting World Trade Organization principles and agreements — is no longer in its best economic interest, the ACC Director said.

Interrupted Supply Chains

At the same time, the data also illustrate that the current US trade actions may lead to severe, unintended consequences that should not be overlooked by the Administration. As the US Administration continues to erect costly barriers to accessing global supply chains and foreign customer markets, the Chinese government is actively working towards directing industrial capacity expansions in their own domestic economy and eliminating tariff and other barriers to doing business with other (non-US) foreign partners.

Sanchez noted that the loss in demand due to retaliatory tariffs on US chemical exports to China would reduce the competitiveness of chemical manufacturers in the US and, as a result, output and job losses in the chemical industry would accrue due to lost demand for chemistry. This lost manufacturing activity would be felt upstream as suppliers to the industry face reduced demand for their output and it would be felt in the local communities where workers spend their wages.

To that point, ACC’s public comments on List 3 also include a growing list of 21 firsthand accounts from companies exposed to the potentially damaging impacts from the Administration’s China Section 301 tariffs and Section 232 tariffs and quotas on steel and aluminum imports. The anecdotes forebode significant disruptions to supply chain operations — incentivizing companies to move U.S. production overseas due to the sudden, uneven playing field that tariffs would create in the global marketplace.

“A trade war will neither achieve a more balanced trading relationship between the US and China nor advance the interests of the US economy, manufacturers, and consumers,” Brzytwa reiterated. The ACC strongly urged the US government to avoid this action, rescind the tariffs currently in effect, and therefore preempt additional retaliation by China.

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