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DowDuPont may Shift Investment due to Tariffs

08.03.2018 -

DowDuPont has said it is considering Canada or Argentina instead of the US Gulf Coast for its next major investment as US President Donald Trump’s proposed steel tariffs will make domestic plant construction too expensive.

The proposed tariffs would add “hundreds of million of dollars” to DowDuPont’s next wave of petrochemical expansion, said Jim Fitterling, chief operating officer of the Dow unit. This could wipe out some of the benefits of using cheap shale-derived gas feedstock.

According to plans revealed thus far, Canada and Mexico would be excluded from the tariffs for now, as negotiations continue on revising the North American Free Trade Agreement (NAFTA).

In 2017, DowDuPont completed construction of new shale-powered facilities worth $6 billion along the Texas Gulf Coast. To the $1.2 billion worth of steel these contained, Trump’s proposed 25% duty on steel imports would have added about $300 million in costs, Fitterling told the news agency Bloomberg on the sidelines of the CERAWeek energy conference in Houston, Texas.

The merged and soon to be split chemicals powerhouse has already announced an additional $6 million in new US plants, but the economics of the decision-making process have changed, the Dow executive said, noting with rising US exports of propane and ethane are already threatening US profit margins.

Thanks to shale gas, half of all US manufacturing investment for the past two years has gone into chemical plants, according to Fitterling. This, he said, “has helped turn a US trade deficit for chemicals into a surplus.”

DowDuPont is now relaying its concerns about the tariffs to the Trump administration through cabinet departments and congressional representatives, adding its voice to free trade advocates and companies that import steel and aluminum. Trump was due to make an announcement late on Mar. 8.

Displeasure with the economic sanctions is said to have been one of the reasons behind the resignation of White House economic adviser Gary Cohn on Mar. 7.

According to the American Chemistry Council, which also has urged Trump to reconsider the tariffs, these will hurt a sector creating jobs. Shale gas has fueled $185 billion of completed and proposed investments in chemical and plastics plant to date, with about half of the money yet to be spent, the organization said.