BANGALORE, INDIA: The win of Republican Donald Trump in the US presidential election will have a significant policy effect on the chemical industry. His campaign speeches point to far-reaching changes in trade, regulations and US economic policies.
Trump during the campaign consistently said that he will seek to undo many domestic policies. Chemical sectors may see growth in demand due to Trump's command to expand infrastructure spending, regulatory/anti-trust policy, this may help domestic mergers and acquisitions (M&A’s) however avoiding cross-border deals.
From one viewpoint, Trump has guaranteed to be to a great supportive of the fossil fuel industry and will probably make it less demanding for oil and coal makers to work together. Then again, he’s been condemning our present trade deals, which have been a significant segment of success in the chemical industry.
Trump has also shown doubt of the Environmental Protection Agency and regulations in general. While the increasing cost of rules has made it harder for chemical producers to compete, executing the EPA’s rules — especially the recently passed TSCA reform — are dangerous to restructuring regulations and enhancing public trust in the industry. It's vague how strong of TSCA change Trump will be, however, numerous trust that if the EPA is hampered in any capacity, it could debilitate the achievement of the new controls.
Trump’s tax policy
The chemical industry is under pressure from the challenging economic environment. The present government corporate tax structure levies a corporate tax of 35 percent on American companies. He has proposed that he would cut corporate taxes from the current level to 15 percent.
If his plans are executed, it would be a benefit for struggling chemical companies such as Dow Chemical, LyondellBasell Industries, PPG Industries and Praxair.
In the meantime, Trump is proposing tax rates of 35 percent and 45 percent for products manufactured outside the US and sold in the US market. But, analysts have raised concerns that organisations may utilise the profits to buy back shares rather than expand and build new facilities that could create more jobs. If this could be watched, the plan would be more effective.
EPA and Trump
In the US, the EPA (Environmental Protection Agency) monitors issues linked to the environment by making laws and imposing fines and permissions. Trump believes the EPA hampers business forcing new laws time after time. Trump was disapproved heavily on this account that he would stop the EPA, leaving chemical and other companies unmonitored.
Based on Trump’s election-season statements concerning the many issues facing the chemicals sector many analyst and associations have released statements on their reaction to the results.
Here’s part of what some analyst/associations say on the new government:
As per ACC releases, “As one of our nation’s largest exporting industries, the chemical industry is driving a manufacturing renaissance, being a major contributor to growing the US economy and creating employment opportunities. The $175 billion in investment in new factories and expanded production capacity by chemical producers, thanks to domestic shale gas, has positioned the US to substantially grow its role as a premier supplier of essential materials for markets around the world, but reaching that potential will require sound trade frameworks. Also, we hope to chart a path forward on the trade that will help American businesses thrive and benefit American workers.”
According to the SOCMA statement, “Trade is critical to the continued success of our country’s speciality chemical industry and continued American leadership around the world. The chemical manufacturing sector is one of America's top exporting industries. SOCMA will work to ensure there is open and fair trade that levels the playing field, particularly for our small and medium-sized manufacturers who are competing globally. It will also address barriers that impede the ability of US speciality chemical manufacturers from growing their businesses.”
“Trump’s focus on US infrastructure investment may benefit US chemical companies, as it may raise demand for chemical products ranging from industrial coatings for steel structures to PVC resins for water works,” said Jason Miner and Christopher Perrella, Bloomberg Intelligence analysts.
“Trump’s corporate tax cuts would also likely benefit firms operating domestically as he seeks to retain and drive job growth. On foreign policy, Trump’s “America First” platform advocates for strong trade protectionism and reduced engagements abroad,” said Lindsay Newman, principal analyst, with IHS Country Risk.
Good and bad impact on India:
India will have a far harder time dealing with the US. Under Trump, India will likewise need to battle with the possibility of improved uncertainty over work and exports which will severely impact the IT and Pharmaceutical industries.
The Indian Pharma industry has a stronghold in the US, the world’s largest pharmaceutical market and the US Presidential elections will have a critical effect as exports are likely to fall. The Indian Pharma sector will see pricing pressures. Trump has favoured tighter pricing regulations. Drug prices are expected to fall in the US, hitting profit margins of many Indian pharma companies.
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