Cabot 'still assessing' potential impacts of U.S. tariffs

BOSTON—Cabot Corp. is assessing the potential impact of U.S. tariffs on products from Canada, Mexico and China, which were announced by President Donald Trump earlier this month.

"Given the timing of the tariff announcements and related delays, we are still assessing the potential impact," Cabot President and CEO Sean Keohane said in a Feb. 3 first quarter earnings call.

Noting that the impact could be different from one country to another, Keohane said Cabot imported "a very limited amount of volume" from China into the US.

"So, we expect the direct impact of these tariffs to be minimal," he said.

If production in China is reduced for tires or other exported products, however, then demand in the country could be affected.

In that scenario, the Cabot leader said he expects to see production levels outside of China potentially increase.

For Mexico, where Cabot operates one rubber reinforcement materials plant, Keohane said he expected "a minimal direct impact" on production, as the unit primarily sells into the Mexican market.

For Canada, Cabot operates two plants that manufacture products for reinforcing carbons, specialty carbons, and specialty compounds product lines.

According to Keohane, a large portion of the production at these plants is sold in Canada, but there also is production sold to customers in the U.S.

"Carbon black products that we produce in Canada and sell into the U.S. represents approximately 10 percent of the carbon black we sell in North America," he said. But "almost all" of those customers are under agreements that allow Cabot to pass through taxes and similar charges such as tariffs.

Cabot, Keohane said, is working with customers on potential alternative supply sources within its broader plant network.

Ultimately, however, if the tariffs are implemented, there could be "a downstream impact on our customers' businesses, and this could impact underlying demand levels," Keohane said. "We are working to better assess the broader impacts of these tariffs on things such as GDP, foreign currency rates, inflation, and overall demand."

The situation, he added, "remains very dynamic, and developing a full understanding of this will take time as we observe how negotiations evolve."