When the world’s two biggest economies go head-to-head, collateral damage is inevitable — just ask China’s petrochemicals executives.
A heavyweight consumer of almost any raw material, China also makes more plastic than any other nation on earth, using a vast constellation of plants along its eastern seaboard.
Some process a petroleum product called ethane, a gas that’s cheap and easy to turn into a chemical building block, which is then used to make everything from packaging to solvents.
Thanks to the shale gas revolution, the US is the largest producer of ethane. China is its top customer, taking almost half of that output.
Or at least it did.
Once upon a time, this trade was a no-brainer. In a more globalized world, it made absolute sense: America was producing more and more ethane, and China was happy to build factories to absorb it.
Now, a situation in which China buys over 99% of its ethane from the US — as it did in the first four months of this year — feels more like the sort of uncomfortable dependency Beijing works hard to avoid.
Both countries, now at odds, have sought out pressure points in the other’s economy, and Washington spotted one in ethane. Even with trade talks set to continue — the two sides meet today in London — the Trump administration has been putting up obstacles to sales.
Companies are being asked to apply for licenses before they can export, and the Department of Commerce has already indicated it plans to deny at least one firm permission. Never mind that China quietly exempted US ethane shipments from its own tariffs.
In terms of scale, this isn’t at the level of China’s efforts to restrict key critical minerals such as rare earths. Substitution is not impossible, and overcapacity means the country can afford to see some plants close down. Yet the pain is real; a reminder that every vulnerability will be exploited.
For now, consumers will pay the price, as disruptions in production push up costs and limit availability.
The current trade spat will eventually end. But in the longer term, a shift in supply lines will likely be permanent.