Global Geopolitical Series: U.S. petrochemical industry fears fallout from trade war with China

Someone’s pain, others’ gain. China, which can be called as the manufacturing hub of the world would experience the pain, while the U.S. tries to gain from bringing home the manufacturing industry. However, the pain will not be China’s alone. There are many industries in the United States that have nothing to gain from a U.S. - China trade war but all to lose. Booming petrochemical industry in the United States could be one such victim.

Why do we say so?

The U.S. is on its way to become the biggest producer of crude oil surpassing Saudi Arabia and Russia. If natural gas is included, it is already the biggest producer. So, when you are taking a war the biggest consumer of petroleum products, it would not be beneficial oil and gas industry at home, thanks to shale technology.

Let’s discuss an example. The U.S. petrochemical Industry is expected to produce a surplus Low-Density Poly Ethylene (LDPE) to the tune of 500,000 tons and that surplus is expected to reach 1.2 million tons by 2025. This is one of the real vulnerable spot for the U.S. as China imports more than 20 percent of U.S. exports of LDPE. China has recently imposed 25 percent tariffs on $34 billion in goods but excluded the majority of PE grades of the polymer so far, but it is included in the list of proposed tariffs.

Similarly, China has been the increasing import of direct petrochemical products from the United States. In addition to that, the crude oil exports have also been rising in recent years. In May this year, Sinopec bought 16 million barrels of crude oil from the United States. While the United States is still a large importer of crude oil, its product surplus rose to 3.5 million barrels per day.