A HUUUGE DISRUPTION! United States and China Trade Tariff Review Curtis D. Spencer President, IMS Worldwide Inc.

Transcription

1 A HUUUGE DISRUPTION! United States and China Trade Tariff Review Curtis D. Spencer President, IMS Worldwide Inc.

2 Trump s China Strategy Be the Bully - hit hard then back off.

3 Trump Threatens New Tariffs on Imports of Steel and Aluminum from China U.S. President Donald Trump pressed ahead on March 6th with import tariffs of 25 percent on steel and 10 percent for aluminum Our Largest Trading Partners; Canada and Mexico are exempt. - Reuters, March 7, 2018 Currently Exempt Countries Include: European Union, Argentina, Brazil, South Korea, Australia, Canada and Mexico.

4 Imports of Steel and Aluminum Goods Nearly $48 Billion In 2017, imports of steel and aluminum goods covered within the scope of the U.S. Commerce Department s Section 232 investigation totaled nearly $48 billion, or about 2 percent of total U.S. imports. Steel imports were a little over $29 billion while aluminum flows were about $19 billion. States hit hardest: Texas, California, Illinois, Michigan, Louisiana, Pennsylvania, Ohio, and New York all import more than $2 billion annually in steel and aluminum products, together accounting for 60 percent of the nation s total. - Brookings, March 6, 2018

5 Steel Is a Declining Industry Trump s tariffs are trying to revive a world of steel production that no longer exists. He is taxing steel-consuming industries that employ 6.5 million and have the potential to grow more jobs to help a declining industry that employs only 140, Wall St. Journal, March 4, 2018

6 China Responds With Complaint to WTO China filed a complaint with the World Trade Organization challenging Trump s tariff hike on imported steel and aluminum last month. The WTO will give both sides 60 days to reach an agreement. -Reuters, March 7, 2018

7 -ABC News, Apr 4, 2018 China Threatens Tariffs on 106 U.S. Imported Products On April 4 th, a day after the U.S. proposed adding a 25 percent tariff to $50 billion of goods imported from China, China responded in kind. China's Ministry of Commerce released a statement listing 106 U.S. products it plans to tax, including soybeans, corn, beef, whiskey, tobacco and aircraft. China didn't say when its own 25 percent tariff on approximately $50 billion of U.S. exports would take effect.

8 China Indicates Intellectual Property Reform Like the U.S., China has its own intellectual property to protect. Moreover, making it harder to import American consumer goods will prove unpopular with some of the private sector companies Beijing loves to tout as examples of the New China. Tech companies like Alibaba want to crack down on false goods sold on its e- commerce platforms, for instance. Most of those fake goods are American brands. Alibaba, like the Chinese consumers it serves, prefer the American brands. China would be hurting those tech companies by making American brands more expensive. - Forbes, April 10, 2018

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10 China Concedes Tariffs on U.S. Cars and Trucks April 10 Xi Jinping has conceded that tariffs on U.S. cars and trucks coming into his country are too high. They are coming down. Raised the DOW 400+ points! Higher trade barriers to U.S. cars and trucks helped Chinese auto production increase to around 30% of total global auto production. Meanwhile, U.S. auto production shrank, even as the Detroit automakers moved some of their labor to lower-cost Mexico. - Forbes, April 10, 2018

11 China Concedes Tariffs on U.S. Cars and Trucks President Xi Jinping renewed a pledge Tuesday to: Open China s markets further for trade and investment Lower tariffs on imported automobiles Agreed to work harder to boost imports China does not seek a trade surplus, Xi said. We have a genuine desire to increase imports and achieve greater balance of international payments under the current account. We ve heard this before! Washington Post, April 10, 2018

12 Could Impact 7% of all China to U.S. Trade Estimates show that the tariffs could hit as much as 7% of all China-US trade. This amounts to roughly $50 billion worth of imports. The expected Chinese retaliatory measures could affect about 887,000 TEU of US containerized trade with China. That is about 6.6% of the trade with China and about 2.5% of the total US trade volume. - Lilly and Associates, April 2, 2018

13 - Wall Street Journal, April 12, 2018 Chinese Demand for U.S. Soybeans China is by far the largest foreign buyer of U.S. soybeans, making up nearly 60% of international sales, according to the Agriculture Department. If tariffs sapped Chinese demand for U.S. soybeans, prompting the USDA to purchase crop supplies to boost prices, it would have to buy huge quantities to provide a significant lift, farm groups said. Government inventories also could compete with farmers fresh crops in the long run, putting a ceiling on prices. Compensating farmers for a 10% reduction in the price of soybeans and hogs could cost $5 billion, according to industry calculations.

14 Tariffs Affect U.S. Beef Producers China announced its willingness to impose 25 percent tariffs on 106 more U.S. products, including beef. The move came the day after the Trump administration announced its intention to impose new tariffs on $50 billion worth of Chinese electronics, aerospace and machinery products. Montana beef accounts for $1.65 billion in total sales annually, and the Chinese announcement comes at a time when Montana ranchers are on the doorstep of sealing a deal to export up to $200 million of beef to China over the next three years. There is a pretty high level of concern over potential impacts to the beef industry, said Jay Bodner, natural resource director for the Montana Stockgrowers Association. We already have about a 12 percent tariff in China right now. If they impose these additional tariffs, then we re up to 37 percent. That would have a pretty big impact on the consumer base that s buying that product in China. Great Falls Tribune, April 7, 2018

15 Source IHS Markit

16 A TRADE DISRUPTION! United States and China Trade Tariff Review QUESTIONS?