Although on-again, off-again tariffs may exclude resin shipments, market players are seeing no shortage of confusion and consternation. | Avigator Thailand/Shutterstock
After many weeks of shifting narratives and uncertainty, participants in recycled polymer markets are working to navigate a constantly shifting tariff environment, in which buyers and sellers as well as customs officials struggle to align federal mandates with on-the-ground implementation.
Adding to the upheaval, President Donald Trump again paused most “reciprocal” tariffs the afternoon of April 9, this time for 90 days, though duties for Chinese imports rose further, to 125%.
Leading up to the latest reversal, Trump enacted steep tariffs on goods from most other countries on April 2, citing inequities in trade relationships. Although Trump has maintained his commitment to tariffs since his inauguration on Jan. 20, throughout February and March he threatened, delayed, imposed and suspended various measures – in the process removing any semblance of calm from commodity buyers and sellers alike.
Traders who do business with Asia are looking for clarity from customs authorities in Hong Kong and other major Asian ports, said Steve Wong, CEO of Fukutomi Recycling, in an interview with E-Scrap News before the 90-day pause was announced. Fukutomi is a large global trader of recycled plastics.
Wong said some companies could send material through countries with lower duties, such as Malaysia and Canada, to offset the steepest of the tariffs. But he was unsure whether the Chinese government would look the other way in such instances, or would ask for the actual origin.
Nevertheless, while global demand for post-consumer plastics has been subdued in recent months, amid lackluster consumer spending, appetite for engineered plastics such as PS and ABS has been consistent. “These are still selling very well,” he said.
The lack of clarity also is forcing market players to interpret the regulations to the best of their ability. For example, commodity brokerage Cellmark believes its North American commodities are covered under the U.S.-Mexico-Canada Agreement, said James Derrico, vice president of new business. The Recycled Materials Association has stated that recycled material imports into the U.S. from Canada and Mexico qualify for the USMCA tariff exemption, provided they were collected in North America and that the importer goes through a process of certifying the material’s origin.
“We think it’s likely that most of these plastics are excluded, and at least Canadian and U.S. businesses excluded,” Derrico said.
“But even with the reciprocal tariffs, we’re not sure how that will affect the plastics market, exports out of the U.S. from what other countries are going to do,” he said.
Unsurprisingly, neither buyers nor sellers are keen to pay more, Derrico said. However, after being stung by the previous round of tariffs in 2018-2019, all of Cellmark’s supply contracts now include clauses to account for tariffs, he said, though the majority of the company’s business is done on a spot basis.
“In situations like that, I do feel that you probably will see (paying the tariff) fall onto the broker or the shipper of record,” Derrico added.
Trader sees mix of potential effects
Ted Kaiser, owner and founder of Dock 7 Materials Group, said that any time a customer’s import costs change, “the first thing they’re going to do is ask me for a lower price, and either I’m going to eat some of that or not.” Dock 7 exports engineered resins such as ABS and PC as well as post-consumer plastics.
However, Kaiser cautioned that pricing adjustments can only go so far. “Obviously, you can’t price something ridiculously out of market.” In addition, some of his customers import plastics from the U.S. into Mexico, and then their end markets are back in the U.S., “so they kind of get hit both ways.”
However, he noted that even before this year’s tariffs, added costs in the form of local trucking fees and taxes were steep to export to Vietnam, for example, and could sometimes be as much or more than the cost of the load itself, especially for lower-value commodities like polyethylene film bales. “So if (the tariffs) do actually end up working something out, and it lowers that, that would be amazing in the long term, but obviously in the short term, there’s a lot of uncertainty about how different places will react,” Kaiser said.
In addition, continuing congestion caused by rerouting to avoid Houthi attacks in the Red Sea has presented logistical challenges, Kaiser said. For example, the number of “free days” – time during which a container is in use but does not incur fees – is important, to allow for customs processing, unloading and perhaps a return trip.
With the increased congestion as well as an insufficient number of vessels in some regions, some shippers are cutting back on free days, and the added confusion over tariff implementation at the destination port can wind up incurring more fees. “A lot of those are not adequate right now,” Kaiser said. “There’s some places where they either accept lower free days or we don’t ship it because I can’t get it available.”
Another element that could become problematic is a proposed port fee on Chinese ships. This could cause shippers to prioritize bigger volumes and head to ports that can handle them, like Los Angeles and New York, increasing congestion there, and to skip smaller ports like Baltimore, Mobile and New Orleans, Kaiser said.
Comparisons to previous disruptions
Despite weeks of leadup, the administration’s waffling made implementation seem sudden to market participants, as the market could not be sure the tariffs were more than mere threats or “negotiating tools.” In 2019, the first Trump administration gave a 30-day notice for its tariff measures against China. That gave buyers and sellers time to determine how they wanted to proceed, Derrico said.
“It’s a little bit different (now), and it’s kind of scary in that as of today, it’s still not clear if things are exempt or not, and what tariff rate is applied to each shipping lane.” As a result, Cellmark is waiting to ship new loads until the company gains clarity, he said.