On March 4th, the U.S. Trade office under the direction of President Trump, announced that it will be terminating the GSP (Generalized System of Preference) duty-free eligibility for India and Turkey. The GSP program is intended to help developing nations grow their economy through trade. The announcement cited the reason for termination as being that the two countries no longer comply with the statutory eligibility requirement. These changes will not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, which began on March 4th. After that time imports from the two countries will be subject to duties at rates indicated by their tariff classifications.
How does this affect your company and the chemical market? Many manufacturers are concerned about the rising costs and the loss of inexpensive raw materials for their manufacturing processes. The National Association for Chemical Distributors (NACD) released comments of disapproval of the decision saying, “U.S. chemical distributors import nearly $1.5 billion worth of goods from India and Turkey every year that are subject to zero tariffs under the GSP program. Removing these countries from GSP, and thus the duty-free status of the chemical products imported from them, will harm our domestic economy by increasing tariffs on these products by $72.2 million annually. This amounts to a 4.9 percent price increase on these goods, which will inevitably be passed onto chemical distributors’ customers and the broader public”.
This announcement has created further uncertainty as negotiations to end a costly trade war between the U.S. and China continue. With a significant number of low-cost chemical raw materials coming from China, India, and Turkey, it remains to be seen what effect this will have on small and medium sized U.S. manufacturers. However, it is almost certain that supply chains and materials costs in almost every major manufacturing sector will see changes in this year.