BLOG: Tariffs, infinite improbabilities and US PE exports to China

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: The US has gained an estimated $2.2 billion in linear low density polyethylene (LLDPE) sales turnover in China since the 1992-2021 Chemicals Supercycle came to an end. It has gained $859 million in high density PE (HDPE). And its exports in tonnes have also surged.

This has occurred as Saudi Arabia, Iran and South Korea, etc have lost a lot of ground.

The US gains are the result of a big drop in import tariffs in February 2020, thanks to a trade deal, and of course the strong US ethane-based cost position. In a deflationary or disinflationary Chinese economy, cost is the king.

But Donald Trump’s election victory has pushed us into a world of uncertainty. Almost anything might now happen.

This brings to my mind the fabulous science fiction series of books and TV and radio shows, “The Hitchhiker’s Guide to the Galaxy”, and its Infinite Improbability Drive. This is defined as such:

The infinite improbability drive is a wonderful new method of crossing interstellar distances in a mere second, without all that tedious mucking about in hyperspace. As soon as the ship’s drive reaches infinite improbability, it passes through every conceivable point in every conceivable universe simultaneously.

In one of any number of scenarios, let’s assume that China responds to increased US tariffs with increased tariffs on imports of US PE, as it did in 2017. Then the US loss could be to the gain of South Korea, Iran, etc.

But, as we saw in 2017, the US might not lose out as whole. Its export flows to southeast Asia, Europe and Latin America might increase as other countries fill the gap created in China.

Here’s some advice: Put the ICIS data into something akin to an Infinite Improbability Drive and you might get the answers you need.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.