Beginning of a tariff thaw? Goldman sees big signal coming from China on key raw materials

After a lot of back-and-forth action, Trump's tariff dampener that iced up world trade -- and especially all trade between the US and China -- may finally have shown signs of a thaw on some critical frontiers, Goldman Sachs Group has noted.

China, the leading producer of plastics globally, may consider exempting imports of petrochemical feedstocks such as ethane and liquefied petroleum gas from tariffs if discussions with the United States yield favourable results, news agency Bloomberg reported on April 25 citing a statement by the global financial services giant.


Analysts told the news agency that if negotiations between the US and China prove to be productive, these feedstock imports could be prioritised for tariff exemptions due to both historical and economic factors.

The analysts pointed out that in 2018, these raw materials previously received waivers from earlier restrictions.

The ongoing trade conflict between the world’s two largest economies has significantly impacted China's plastics sector, particularly affecting processors who rely heavily on US supplies for the majority, if not all, of their essential materials.

Since the implementation of the Chinese restrictions, there have been notable shifts in trade flows, with some liquefied petroleum gas shipments being redirected; US cargoes that were initially meant for China have been swapped for deliveries from the Middle East.

The analysts pointed out that both nations are "mutually dependent on their ethane and propane trade partnership." They further noted that China’s propane dehydrogenation facilities are more efficient in processing US propane compared to liquefied petroleum gas from the Middle East.

Although President Donald Trump mentioned this week that his administration is engaged in discussions with China regarding trade matters, Beijing has refuted claims of ongoing negotiations and has insisted that the US must eliminate all unilateral tariffs.