The impact of Sino-US trade war on polyurethane: automobiles

On September 18, in order to protest that the United States violated the trade and multilateral system, it forcibly imposed tariffs on US$200 billion of goods from China, and also to protect its own legitimate rights and interests , The Customs Tariff Commission of the State Council of my country issued an announcement, deciding to impose additional tariffs of 5-10% on 5,207 tax items originating in the United States. The measure involves goods imported from the United States with a trade volume of about 60 billion U.S. dollars. It will come into effect in phases at 12:01 on September 24, 2018. There are many TDI, MDI and other polyurethane materials (for details, please refer to Tiantian Chemical Network News “China’s tariffs on the United States involve PU raw materials”). Strike while the iron is hot. Today, the editor will take you to review the content related to the auto industry in the tariff increase between China and the United States and briefly talk about the possible impact on the domestic polyurethane market.

China imposes additional tariffs on auto-related products imported from the United States

This catalog also includes auto-related products imported from the United States such as various types of vehicles Special automotive parts such as rubber tires, manual/electric sunroofs, and drive shafts. In fact, the US$34 billion levy list that came into effect on July 6, 2018 already included hybrid electric off-road vehicles/passengers and other complete vehicles and special auto parts with a certain displacement range. The 16 billion additional levy list that came into effect on August 23 also includes cars, off-road vehicles and other vehicles with some displacements, even accounting for more than half of the entire list. The two catalogs that have already taken effect are subject to a 25% tariff.

The United States imposes additional tariffs on auto-related products imported from China

In the previous list of 34 billion + 16 billion, the United States has more auto-related items imported from China There are more than 40 kinds, including traditional fuel vehicles and new energy vehicles, as well as various metal parts, seat parts and bearings, etc.

Among them, the United States has become China’s largest exporter of new energy vehicles. According to statistics, in 2017, China exported 214 pure electric passenger vehicles to the United States, with sales of US$1.65 million, and exported 1,042 plug-in hybrid passenger vehicles to the United States, with sales of US$61.15 million. Among the exporting countries of China’s new energy vehicles, the country with the largest total amount and amount involved.

Will China’s polyurethane market be affected by the impact of the Sino-US trade war on the auto industry?

According to the Michigan-based Center for American Automobile Research, it is estimated that American consumers bought about 50,000 cars produced in China in 2017. According to statistics from the Passenger Federation, in 2017 China exported a total of 1.06 million vehicles, and less than 5% of them were exported to the United States. The industry generally believes that it will have little impact on the overall auto industry. Even BYD, which occupies more than 80% of the new energy vehicle market in the United States, is expected to mitigate some of the impact because it has established factories in the United States. Other auto-related items exported to the United States are mostly rubber and metal parts such as tires and bearings.

For the polyurethane industry, there are generally three types of automotive polyurethane materials: automotive interior parts (seat cushions, backrests, headrests, steering wheels, ceilings, etc.), automotive functional parts (bumpers, steering wheels, body panels, Engine hood, trunk lid, etc.) and PU CASE materials (paints, adhesives, sealants, etc.).

According to the calculations of Morgan Stanley and China Industrial Securities, under the assumption that the United States imposes all three tax rates on China: 15%, 30%, and 45%, China’s exports to the United States will drop by 21%, 46-46.5%, and 72% respectively. Corresponding to China’s total exports will drop by 4%, 8%, and 13%. Based on the average annual export of 50,000 cars to the United States and an average decline of 38.75% in exports to the United States, the export of cars to the United States will decrease by about 20,000 cars. The volume is not large, and it is estimated that only 400-500 tons of polyurethane materials for vehicles will be affected by this, which is very small, and the domestic market is very easy to digest and has almost no impact.

PU irrelevant digression:

According to statistics, China imported 280,000 cars from the United States in 2017, accounting for about 1/4 of the total imports, and all of them will face the impact of additional tariffs (15+25=40% tariffs). While other non-U.S. imported cars still enjoy the 15% preferential tax rate, the choices of Chinese consumers will change. It is expected that the market share of China’s imported cars will also be reshuffled in the future. In this war without gunpowder smoke, it is still unknown who will win the battle.