Chinese port
- China's unexpected increase in exports in July was due to trade with Taiwan, Singapore and South Korea to offset the decline in US sales.
- According to analysts, trade between the US and China is expected to continue to decline, with a devaluation of the yuan likely unlikely to offset higher tariffs
The first year of the US-China tariff war drove the world's two largest economies further apart in terms of trade. New evidence suggests that Beijing is relying on its Asian neighbors to offset losses from declining trade with the US. China would like to reduce its exports to the USA in the long term in order to achieve a lower dependency.
In the past month of July, China's export quotas to the US have again dropped by 6,5 percentage points.
China also imports fewer American goods, with U.S. imports falling 19,1 percent in July. With US product purchases in China declining in eleven out of twelve months, it is unlikely that the trend will reverse in the near future.
An increase in Chinese total exports by 3,3 percent in July was due to increased demand from neighboring countries Taiwan, Singapore and South Korea, whose purchasing power was severely damaged by the trade war.
It is unlikely that anybody can fully close the gap left by China's emigration of US buyers abroad, as the US remains the largest economy in the world and the most dynamic consumer market in the world. According to the International Monetary Fund, China's average income per person is almost 40 years behind the US.
The outlook for Chinese exports to the US is likely to continue to deteriorate in September after US President Donald Trump
has threatened to impose a 10 percent tariff on almost all remaining Chinese exports to America. The total volume of tariff-burdened China exports to the USA is estimated at 300 billion US dollars. This could lead to more Chinese exports in the short term in August as companies try to avoid paying the new duty.
China's new focus on trade with other countries was illustrated by a post on the official WeChat account of the General Customs Administration, which named China's largest trading partners in the first seven months of the year. The post mentioned the European Union and Asia, among others, then the report jumped to its fourth largest trading partner, Japan. China's third largest trading partner to date this year - the US - was neglected in the statement.
The new figures were for the second full month, in which 250 billion US dollars in Chinese goods imported into the US was subject to a higher duty of 25 percent, up 10 percent from the 1. June increased.
July was a relatively quiet month in the trade war after Trump and Chinese President Xi Jinping agreed a ceasefire at their summit meeting in late June. As a result, however, bilateral tensions have worsened and analysts are not expecting China's foreign trade to recover quickly. The People's Bank of China dropped the yuan on 7 on Monday
to the US dollar, which could help reduce the impact of the new tariff, as Chinese goods are cheaper to buy for foreign companies, but this is unlikely to fully offset the costs.
"Looking ahead, exports are likely to remain under pressure in the quarters ahead, as a weaker yuan prop could be overshadowed by further US tariffs and broader external weakness," said Capital Economics.
The collateral damage caused by the trade war was also great. Many other nations have been caught in the crossfire due to sluggish downstream demand and investment paralysis, meaning that the prospect of a global recession is becoming very real.
“The trade war has exceeded expectations and much is at stake for the world economy. Our global recession prospect for the next 12 to 18 months has increased from 40 percent to 50 percent, ”said Steve Cochrane, Moody's Analytics chief economist for Asia Pacific.
While this was less dramatic than analysts expect, it shows a continued decline in Chinese consumption and production as many manufacturers have to import parts.
The better than expected import performance was driven by industrial goods such as copper, crude oil, coal and iron ore. Soy imports also rose to their highest level in almost a year, but this was due to purchases from Brazil. The White House has raged against China's failure to buy more American soybeans - a politically important harvest for Washington as many farmers voted for Trump in 2016.
Trump, meanwhile, is pleased with the news that the US trade deficit has narrowed slightly against China in July, but may also be made aware of the fact that Vietnam is becoming an increasingly important destination for Chinese exports.
Thursday's customs data showed that Chinese exports to Vietnam have risen by nearly 19 percent since the beginning of the trade war. Trump recently fought against Vietnam and criticized many manufacturers leaving China for Vietnam to avoid tariffs. This has led to an increase in Vietnam's trade surplus with the US.
US authorities were made aware that Chinese manufacturers were shipping goods to the ports of Vietnam to then label them as made in Southeast Asia before ultimately being exported to the US, illegally avoiding tariffs. This has created a "very real threat" from US tariffs to Vietnam.
“The issue of the envelope is not the only element raising concerns about whether the US could extend its tariffs on Vietnam. In particular, the large goods trade surplus that Vietnam has with the US is an obvious pain point, ”said Frederick Burke, managing partner of the law firm Baker McKenzie's office in Ho Chi Minh City. "There are ways Vietnam could easily promote more trade to offset this surplus and make it" freer and fairer "as the US is calling for."
Donald Trump's China tariffs have cost US companies and consumers $ 6 billion in June
The Americans are already paying record-high tariffs and the biggest increase for consumers is still on 1. September. Data from the US Treasury Department indicates that 30. In the last twelve months, customs duties of 63 billion USD have been levied
The US Treasury Department raised $ 6 billion in customs duties in June, according to current government figures. However, these costs have been passed on to American companies and consumers, according to a group that criticizes the conditions imposed on US President Donald Trump in the context of the trade war with China.
A report released Wednesday by Tariffs Hurt the Heartland, a coalition of companies and trade organizations that opposed the tariffs, said that June tariffs increased by 74 percent over the previous year. About 3,4 billion dollars of this are attributable to new taxes that Trump has collected since the beginning of the trade war last year.
The group's report, which was compiled from data from the US Treasury and the Census Bureau, addresses for the first time the impact of the sharp increase in Chinese customs duties on 200 billion dollars from 10 percent to 25 percent in China May. It came days after Trump announced another round of customs clearance for additional 300 billion dollar imports on the 1. September should come into force.
After analyzing government data, Tariffs Hurt the Heartland found that American businesses and consumers had paid more than $ 2018 billion in new tariffs from the start of the trade war in 27 to June this year. The vast majority - nearly 75 percent - of these tariffs were on Chinese imports.
The imposition of tariffs on China was Trump's negotiating tactic and has provoked criticism in the US, as many believe the move has cost jobs, increased consumer prices and dampened US economic growth.
While the first tariffs were aimed at industrial components from China, the new round in September is expected to cover items that American consumers buy directly, such as: As toys, mobile phones, computers, shoes, clothing and video games.
Jay Foreman, CEO of Basic Fun! Said that with the additional tariffs his toy company would either have to cut jobs or raise prices. "The money has to come from somewhere," said Foreman, whose Florida-based company employs 110 people. "If we can withstand an 10 percent rate, we'll have to reduce headcount by 10 percent. An increase in the tariff by 25 percent means a reduction in the workforce by 25 percent. "
Responding to domestic criticism, White House trade adviser Peter Navarro said tariffs on Chinese imports would not affect consumer prices. "China has strategically set tariffs by lowering its prices and devaluing its currency," Navarro told Fox News Sunday this week.
However, not everyone agrees. On a call from Tariff's Hurt the Heartland on Wednesday, Lance Ruttenberg, CEO of American Textile Company of Pittsburgh, Pennsylvania, said the entrepreneurs are not currency traders. "We cannot rely on monitoring currency changes to manage our business," he said.
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Bejing's next step?
Financial markets have calmed down amid signs that China will not allow the yuan to weaken further after falling below the 7 USD for the first time in more than a decade.
But China still has some levers to pull.
The Chinese Rare Earth Association announced on Wednesday that it would support countermeasures in the escalating trade dispute with the United States and accused Washington of using "bullying" behavior to suppress China's development.
China's Rare Earth Industry Association issued a statement on Monday after a special working meeting discussing the "Guidelines" announced by Chinese President Xi Jinping during a visit to a rare earth in Jiangxi in May.
The visit by Xi has sparked fears that China might exploit its predominance over rare earth production, a group of 17 chemical elements that are valued for their use in consumer electronics and military equipment in the escalating trade war.
China's President Xi Jinping issues guidelines for the rare earth industry
The Chinese Rare Earth Industry Association expressly points out that Chinese rare earth exporters must be more cautious after the Trump government announced last week that it would raise tariffs on Chinese imports.
After a special working meeting held on Monday, the association issued a statement that rare earth companies will follow Chinese President Xi Jinping's "guidelines". This happened while visiting a major rare earth plant in east China's Jiangxi Province.
The association said that Chinese rare earth companies would support China's counter-strikes in the escalating trade war with the US and called the US tariff dispute "bullying," according to the working minutes of the association's secretariat on Wednesday.
While the association rarely commented on the trade war between the US and China in the past, the statement said that Chinese rare earth companies "should capture the peculiarity of the rare earths". The rare earths are a group of 17 valuable elements that are widely used in modern high-tech products from smartphones to high-precision rockets.
Wu Chenhui, an independent rare earth analyst, told the Global Times that mentioning the special nature of rare earths may be a reminder that China's rare earth exporters are pursuing a more cautious strategy towards the US.
Chen Zhanheng, deputy secretary-general of the association, announced that China's Rare Earth Exports to the US in the first half of 2019 decreased by 11,3 percent year-on-year.
"A 17 percent increase in refined rare earths, which are difficult to store due to oxidation, suggests that some US importers are boosting purchases due to China's dominance in rare earth refining," said Chen.
China's Rare Earth Industry should ensure that the cost of US punitive tariffs is borne by the US market and US buyers, the statement says.
US President Donald Trump said last week that he would impose additional tariffs on Chinese goods worth $ 300 billion, which would cover 97 percent of Chinese exports to the United States. However, the US has previously avoided imposing tariffs on Chinese rare earths, which it heavily relies on.
Huawei rules expected
Tensions could further intensify following the adoption of a US provisional ban on the purchase of telecommunications equipment from five Chinese companies, including Huawei Technologies Co Ltd, the world's largest manufacturer of telecommunications networks.
The ban, which was part of a law passed last year, is part of a sweeping US move against Huawei, the world's largest manufacturer of telecommunications networks. Washington has accused the company of espionage and theft of intellectual property.
Huawei has repeatedly denied that it is controlled by the Chinese government, the military or the intelligence services. She has sued the US government for restrictions in the Defense Law.
Trump had assured Xi that some restrictions on Huawei would be relaxed, but US companies have complained that so far they have received few answers to this situation.
The US government has urged its allies not to use Huawei equipment that China could exploit to spy on. The reaction of the allies was uneven.
Market report on the trade war Institute for Rare Earths and Metals Arndt Uhlendorff - August 2019
