Tariff Tracker: Proposed Tariffs on Plastic Bags Could Harm Green Businesses

On September 19, 2018, the US Trade Representative (USTR) announced the finalized list of 10% tariffs that will take effect on September 24 on imports from China with an annual trade value of $200 billion, increasing to 25% on January 1, 2019.

The inclusion of certain plastic bags in this tariff initially sounds like a boon for green businesses attempting to compete with dominant plastic bag manufacturers; however, the scope of this tariff could have the opposite effect. The bags targeted by the tariff—those constructed of polymers other than ethylene (i.e., HTS code 3923.29.00)—are actually those that compete with the ubiquitous ethylene plastic bags, potentially making these eco-friendly alternatives more costly to produce.

Types of Plastic Bags Imported to the US

In 2017, the US imported $2.2 billion of ethylene bags. China was the leading exporter to the US and accounted for over $818 million of imports. Ethylene bags comprise the majority of plastic bags familiar to consumers, including those made of:

• low-density polyethylene (LDPE), which are commonly used for the bags at grocery checkouts (resin code 4)
• high-density polyethylene (HDPE), which are used as bread packaging bags and the bags grocery store shoppers use for produce (resin code 2)

The US imported far fewer non-ethylene plastic bags—only $428 million—and China accounted for well over half of that total with $248 million of imports. Bags made of resins other than ethylene include:

• polypropylene bags, which are often used as reusable grocery totes (resin code 5)
• biodegradable and compostable plastic bags made from bio-based polymers like polylactic acid (PLA) and polyglycolic acid (PGA) (resin code 7)

Increasing Prices Will Limit Environmentally Friendly Options

Because of the significantly lower import levels for non-ethylene bags, it would be tempting to overlook their importance; however, tariffs on non-ethylene plastic bags will have an influence on their availability as alternatives to ethylene bags.

Camilo Ferro of One Earth Packaging told the USTR 301 Committee evaluating public response to the proposed tariffs that despite pressure from various municipalities to limit plastic bag use, the developing compostable bag industry faces significant barriers due to the dominance of traditional plastic and paper bags.

To reduce the presence of ethylene bags and meet sustainability and zero-waste goals, companies such as Kroger will require affordable alternatives. Many domestic bag suppliers will import bags from such countries as China to meet this growing demand, and a tariff on these bags will make them more expensive and thus less competitive despite their environmentally friendly profile. This restriction on imports will limit plastic bag choices, complicate sustainability goals, and unlikely help achieve the USTR’s stated aim to reduce unfair trade practices.

To Learn More

Want to find out more about dueling tariffs and the industries they'll impact the most? Download "US & China: Tariff Impact Report", a white paper from the Freedonia Group.