Trump's Re-election May Fuel China's PET Short-Term Export Surge: What's Next for the Global Polyester Trade?

Impact of U.S. Trade Protectionism on Polyester

The impact of Sino-U.S. trade tensions on the polyester industry has been particularly significant, especially after the U.S. imposed tariffs and anti-dumping duties on Chinese polyester products. Since 2015, products like PET resin bottle grade have been subject to anti-dumping and anti-subsidy duties, essentially blocking these goods from entering the U.S. market. For example, U.S. tariffs on Chinese PET films and resin have severed trade routes, forcing these products to find alternative channels into the U.S. market. However, polyester industrial yarns still maintain a certain market share in the U.S.

Furthermore, the U.S. International Trade Commission (USITC) has conducted multiple anti-dumping investigations on PET resins from China, Canada, India, and Oman, consistently imposing anti-dumping duties during related reviews. These trade policies have escalated Sino-U.S. trade tensions, particularly limiting Chinese polyester products' access to the U.S. market, especially in non-textile applications.

With the expectation that the Trump administration will continue to pursue protectionist policies, especially imposing high tariffs on Chinese goods, it is anticipated that trade tensions between the U.S. and China will intensify in the coming years. While other markets, such as Southeast Asia, the Middle East, and Latin America, may become new export targets for Chinese polyester producers, trade barriers and anti-dumping measures in these markets are also expected to rise.

Impact of Energy Policies on PET Production Costs

The Trump administration's energy policies were aimed at positioning the U.S. as a global leader in energy production, particularly in oil and natural gas. Key measures included relaxing environmental regulations, increasing domestic oil and gas drilling permits, and encouraging shale oil production. These policies significantly boosted U.S. oil output, making the country one of the largest oil producers globally and reducing its dependence on foreign oil. As a result, the increase in domestic oil supply helped to lower global oil prices.

For polyester manufacturers, lower oil prices directly reduce production costs, enhancing their global competitiveness. Trump's energy policies, by ensuring a rise in domestic oil production, contributed to U.S. energy independence and indirectly impacted global oil price fluctuations. While these policies offered short-term cost advantages for polyester producers, the long-term volatility of global oil prices remains a source of uncertainty, particularly in periods of sharp price fluctuations.

Currency Fluctuations and Global Trade Dynamics

Following the results of the 2024 U.S. presidential election, with Trump's victory, the U.S. dollar index surged, and the Chinese yuan depreciated sharply. As of November 7, 2024, the offshore yuan surpassed the 7.2 mark.

The depreciation of the yuan can boost the competitiveness of Chinese exporters, particularly in a low oil price environment, potentially helping Chinese polyester producers expand their market share. However, if the yuan depreciates too quickly, it may prompt other regions to implement more stringent trade protectionist measures, exacerbating trade barriers in the global polyester industry, especially in the U.S. and European markets.

Under Trump's administration, the Federal Reserve's interest rate hikes strengthened the U.S. dollar, attracting more investors. At the same time, the escalating trade war between China and the U.S. led to tariffs and anti-dumping duties on Chinese products, including polyester, which put pressure on the yuan exchange rate. Analysts widely predict that Trump's policies could further reinforce the U.S. dollar's strength, particularly against the yuan. This strong dollar phenomenon increases the cost of exports from China, especially polyester products, making Chinese goods less competitive in the international market.

Trump's policies, particularly his stance on de-globalization and trade protectionism, have created uncertainty around future expectations of the U.S. dollar and yuan exchange rates. Consequently, the fluctuations in the dollar and yuan are critical factors to monitor for the global PET market, especially in relation to exports to the U.S.

China: Rush to Export Phenomenon and Its Dual Impact

The phenomenon of rush to export can be seen in multiple industries, particularly in the context of China's polyester exports during times of currency depreciation. As the Chinese yuan weakens, exporters can benefit from a competitive price advantage, driving them to increase their overseas market share, especially in regions like Southeast Asia, the Middle East, and Latin America. This export surge can be particularly advantageous for industries like polyester, where price fluctuations often influence demand.

However, the situation presents a double-edged sword. A sharp or prolonged devaluation of the yuan may provoke protectionist measures in other countries, such as anti-dumping tariffs or trade barriers, as evidenced by the U.S. during the Trump administration's trade war. Retaliatory tariffs and increased trade friction have already shown negative effects on U.S. exports, suggesting that China could face similar pressures if trade partners decide to take protective actions. Additionally, extended devaluation could trigger domestic inflationary pressures, which may undermine China's own economic stability long term, trade tensions, particularly with major partners like the U.S., could challenge the growth prospects of Chinese PET exports. 

Conclusion

The ongoing trade tensions between the U.S. and China, fluctuations in energy policies, and currency exchange rate volatility present both opportunities and challenges for Chinese polyester manufacturers. While the depreciation of the Chinese yuan may enhance export competitiveness, it could also provoke protectionist reactions from other countries, exacerbating global trade barriers and potentially weakening long-term growth prospects.

In response to the complex global market environment, polyester industry participants must adopt strategies such as diversifying market channels, enhancing product value, and strengthening supply chain management. Additionally, focusing on technological innovation, improving product quality, and offering superior customer service will be crucial in navigating future market changes and ensuring sustained growth.

Reference

1. China Chemical Fiber Information Network(November 7, 2024).US Elections Conclude: Chinese Polyester Companies May Experience Short-Term Export Rush

2.CGI Economics & Policy (March 21, 2019).The Real Cost of Trump's Trade War

3. Xe Corporate(October 17, 2024). How the 2024 U.S. Election Could Shake Up Currency Markets: What Your Business Needs to Know

4. Morgan Stanley(September 18, 2024).A Bumpy Ride for the U.S. Dollar

5.Cornell SC Johnson (June 14, 2024).Trade Titans: The Impact of the U.S.-China Trade War on Global Economics

6.The American Presidency Project(October 23, 2019). Fact Sheet - President Donald J. Trump Is Ending the War on American Energy and Delivering a New Era of Energy Dominance

7. Tucson Sentinel（Sep 20, 2024）U.S. oil & gas production surged to record highs under both Trump and Biden-Harris