WASHINGTON—President Trump's administration's plans to impose tariffs on Chinese fluoropolymer imports would have a "disproportionately adverse" impact on the U.S. industry, weakening its trade surplus with China and possibly pushing investment offshore, industry officials told a Washington hearing July 24.
Several companies and industry groups testified against U.S. government plans to put 25 percent tariffs on various grades of Chinese fluoropolymer imports, arguing during a special interagency panel convened by the U.S. Trade Representative that it would exacerbate a global shortage of the material.
The U.S. government wants to slap tariffs on a broad range of Chinese imports as part of a strategy to force Beijing to crack down on what Washington said are intellectual property violations, forced technology transfer and other unfair business practices.
But several fluoropolymer industry executives argued their industry is not the right target.
"Duties on PTFE [polytetrafluoroethylne] resin and other fluoropolymer products from China would have a deleterious and disproportionately adverse impact on the domestic processing industry," said Richard Baillie, president of Baillie Advanced Materials in Newark, Del., representing the Fluoropolymers Trading Alliance.
"The imposition of such duties will cost American jobs, exacerbate the current supply shortage, and risk our trade surplus," said Baillie, a longtime former DuPont Co. executive and past chairman of the Fluoropolymers division of the Plastics Industry Association, although he was not speaking for that group.
He said the U.S. fluoropolymer industry had a trade surplus of $15 million with China last year and is on pace for a $21 million surplus this year.
"We benefit from trade with China now, as evidence by the trade surplus," he said. "The U.S. fluoropolymer industry is currently strong and growing."
He identified some specific challenges that tariffs would worsen, though. He noted that the fluoropolymer industry currently faces a global shortage of materials, a situation which tariffs could worsen for U.S. companies that use fluoropolymers.
And he noted that China currently has more than half the global capacity and reserves for fluorspar, used to produce the fluorine needed for fluoropolymers: "Today China is an essential trading partner."
Baillie was the first of 80 witnesses from a wide range of industries expected before the government hearing July 24-25. He was joined by several other representatives from fluoropolymer makers.
Daikin America, the U.S. unit of Japan's Daikin Industries Ltd., told the hearing that the tariffs on Chinese imports could hurt plans for future U.S. investment.
That's because the company currently has a new product, a fluoropolymer melt resin for the data communications market, that it imports from its Chinese resin plant and then does further compounding at a small Daikin plant in Massachusetts.
It wants to move production of that resin to its large Decatur, Ala., plant, but that facility is at full capacity and would require new investment, said Gary Stantis, Daikin America's vice president of business development.
But to make that investment, which is part of a $200 million expansion the company is studying for Decatur, Daikin must first build up U.S. market share for the new material, and that will be harder if the resin it imports from its Chinese factory faces a 25 percent tariff, Stantis said.
The company told the government in its formal filing that it "would prefer to move production to the U.S. for these products, as we have for other products. Each product requires a new production process and substantial investment. But this will only be done if we are able to establish a customer base and a U.S. profit margin to justify our expansion."
Speaking in an interview after his testimony, Baillie said Daikin is not alone in that calculation.
He said the threat of tariffs has other companies in the U.S. fluoropolymer manufacturing chain studying whether they should put production in Canada or Mexico to avoid the 25 percent tariffs and maintain competitiveness against other countries that don't face the new China-U.S. tariffs.
"Already businesses are looking at ok, what do I do, how do I deal with this?" he said. "Well, it's invest in, move your factory to Mexico, or move your factory to Canada. Then you can bring it right across the border, you don't have to pay the tariffs, and you're fully competitive."