High value of exports
But some executives still expect business-friendly moves by administration
The direction of U.S. trade policy concerns the petrochemical industry.
The booming U.S. petrochemical industry has become increasingly focused on foreign markets, hoping to tap demand for consumer goods from growing middle classes in China, India and Latin America.
But Donald Trump’s “America first” policies, which could include border taxes and higher tariffs on imports, has raised concerns about the direction and future of global trade.
Trade was front and center last week at the World Petrochemical Conference by IHS Markit in Houston, where more than 1,200 people from 47 countries gathered to discuss the sector that is increasingly selling chemicals and plastics throughout the world. Petrochemical executives and analysts expressed optimism that the Trump administration won’t launch any broad trade wars that would hurt U.S. exports and will instead focus on cutting corporate taxes and regulations.
Bob Patel, CEO of Houston-based LyondellBasell, said he expects such business-friendly moves take precedence over border adjustment taxes or massive new tariffs. LyondellBasell has 55 manufacturing plants in 18 countries, including several Houston-area sites.
“My sense is that people are going to be pragmatic at the end of the day and recognize that global trade is important for the American economy,” Patel said. He added that he was reassured that would be the case after meeting recently with Commerce Secretary Wilbur Ross and Republican congressional leaders.
The proposed border adjustment tax would put a 20 percent tax on U.S. imports, while eliminating export duties and lowering corporate taxes and not taxing exports. The fear is such a policy would trigger trade wars with China and other countries where petrochemical companies want to export their goods, said Nariman Behravesh, chief economist of IHS Markit, an economic and industry research firm.
Trump has abandoned the Trans-Pacific Partnership trade agreement. He’s also threatened to tear up the North American Free Trade Agreement, although Behravesh said the administration’s more recent talking points focus only on tweaking the free trade agreement between the U.S., Mexico and Canada.
Such protectionist policies only slow growth, lead to global trade wars and punish U.S. consumers with higher prices, Behravesh said. Concerns about manufacturing jobs moving overseas have largely driven the changing outlook on trade, Behravesh said, but about 75 percent of U.S. manufacturing job losses results from increased automation, not unfair trade deals.
“My sense is that people are going to be pragmatic at the end of the day …” Bob Patel, CEO of LyondellBasell