North America plastics free trade to prevail after current tariffs-induced ‘chaos’ – PLASTICS

MEXICO CITY (ICIS)–The US plastics sector is hopeful free trade in North America will ultimately prevail as the country renegotiates its trade deal with Canada and Mexico in 2026, according to the chief economist at the trade group Plastics Industry Association (PLASTICS).

Perc Pineda, chief economist at the trade group, said the previous renegotiation of the North American trade deal USMCA had been beneficial for the three countries’ plastics sectors, pointing to higher percentage of regionally produced plastics going into the automotive sectors, for example.

He added that history is already a guide about what happened in US President Donald Trump’s first term, when tariffs on China were imposed and a considerable number of companies operating there set up subsidiaries in other Asian countries such as Vietnam, which only replaced China as supplier but did not bring production back to the US or North America.

All in all, Pineda admitted the current ‘chaos’ in the US trade policy after Trump’s second term started in January is creating uneasiness among plastics companies, but he said the focus should be on the “intent of the message” rather than the “theatrics” of how that message is delivered.

Pineda was speaking at the plastics trade fair Plastimagen in Mexico City.

USCMA HAS BEEN GOOD – DON’T BREAK IT
Pineda said the USMCA renegotiation under Trump’s first term, which replaced the previous NAFTA agreement from the 1990s, had caused positive effects on the regional plastics sector, which deepened its interconnectedness – the reason why he said it would be very difficult that the plastics sector ended with no trade agreement at all in the region.

“We made progress when we transitioned from NAFTA to USMCA. For instance, we have now higher North American content in automotive trade, rising from 62.5% to 75%. That’s an incentive for higher regional production in Mexico, in Canada, and the US. And that’s good for economic growth,” said Pineda.

In fact, he was confident that after the current uncertainty in the US trade policy the renegotiation of the USMCA due in 2026 would keep free trade in plastics after all, just like it happened in the transition from NAFTA.

Pinda conceded the current shifts in trade policy coming out of the US – with tariffs being announced then quickly reversed, cancelled, or postponed on several occasions – is putting businesses on edge, as investment plans come into question due to the uncertainty.

“This is where the chaos starts, troubling businesses. For instance, imports from Mexico that comply with USMCA would be excluded from the 25% tariff at least for another month [after the initial month suspension in February], meaning there a window for President Claudia Sheinbaum to negotiate,” said Pineda.

“I trust USMCA will continue. You cannot convince me otherwise that there’s not going to be a free trade of some kind. I remember the first time I spoke at Plastimagen in 2019 – we’ve been through this before. If history is our guide, we will once again face this challenge.”

He added the proximity of Mexico and its relation to the manufacturing activity in automotive, for instance, where up to the 33,000 parts going into a vehicle, a third are plastics, would make an outlook without free trade troubling for that manufacturing sector and many others where trade between the countries is intense.

“One good example regarding US trade policy is when it imposed tariffs on China. It prompted a lot of Chinese companies to go to other countries such Vietnam, Cambodia, Laos, Malaysia, or Thailand. [In short time] Vietnam suddenly was in the top 20 in the global plastics ranking, in which they had never been before,” said Pineda.

“It’s really a result of the change in trade policy that has shifted production of Chinese companies into subsidiaries in other Asian markets. The US now has a trade deficit in plastics with Vietnam on plastic products.”

Pineda was asked how business can adapt to the volatility caused by the decision coming out of the White House nearly daily, in trade policy and practically everything else.

“If there’s one thing that I can say is focus on the intent of the message, and don’t be overwhelmed by the theatrics of it. I think the message has always been the same, but it is the messenger that is changing on how he is delivering the message, from hour to hour, day to day, month by month, year by year,” he said.

“I am even surprised that even the financial markets [with heavy falls this week] are surprised: this is already something that he announced during his presidential campaign: it is the movie we’ve seen before. There will be fair trade eventually.”

Pineda wanted to end with a thankful message, speaking to an overwhelmingly Mexican audience aware that the $800 million/year in Mexican plastics exports to the US could be hit hard if tariffs are imposed, according to calculations by the Mexican trade group Anipac.

“I’d like to leave the stage by saying, on behalf of the more than 1 million workers in the US plastics industry: thank you very much, Mexico,” he said. “And to the plastics industry in Mexico, I’d like to thank you for sharing your vision and giving us interesting information.”

Plastimagen runs on 11-13 March.