President Trump Targets China – Utilities, Airlines and Callers May Pay The Price — Panjiva
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President Trump Targets China – Utilities, Airlines and Callers May Pay The Price

China 2968 Industrials - Aero/Defense 196 Industrials - Capital Goods 580 Tariffs 1791 U.S. 5314

The U.S. Trade Representative has published the result of its section 301 review of Chinese intellectual property practices. Perhaps unsurprisingly this concluded that practices including joint venture requirements and state-sponsored cyber-theft have resulted in damage to the U.S. economy worth over $50 billion per year. Three actions will be taken including tariffs on Chinese goods at an additional ad-valorem rate of 25%, a WTO complaint about China’s practices and restrictions on Chinese investments in the United States.

A precise list of products to be covered will emerge within 15 days and will be subject to 30 days of consultation, but will include aerospace, information and communication technology, and machinery. Presuming the government wishes to target $200 billion of products (i.e. $50 billion of duties at a rate of 25%) only $116 billion of annual imports can be covered by semiconductors, telecoms equipment and PCs as outlined in Panjiva research of March 14.

Panjiva data shows U.S. imports of aerospace-related products from China, including aircraft, parts and engines, were only worth $1.11 billion in the 12 months to January 31 after expanding by 3.8% on a year earlier.

CHINA’S AEROSPACE SALES TO AMERICA CLIMBING, BUT LITTLE ALTITUDE SO FAR

Chart shows U.S. imports of aerospace products (aircraft, parts and engines) from China on a monthly (dotted) and annual average (solid) basis. Source: Panjiva

Imports of machinery – including electrical and mechanical systems but excluding consumer products such as home appliances – from China totaled $34.7 billion in 2017.

Again, assuming the aim is to target $50 billion of duties rather than duties on $50 billion of products that would suggest consumer goods would also need to be targeted. The largest machinery import lines that may be targeted include power transformers ($5.68 billion), gas pump and compressor systems ($3.38 billion), and air conditioning systems ($2.65 billion).

There is also the – potentially more likely – possibility that the duties will be applied to $50 billion of goods. That would be similar in size to the $49 billion targeted in the section 232 review of metals.

China unsurprisingly has stated it is “confident and capable of meeting any challenge”, which will likely include challenging America’s move at the WTO as well as retaliatory tariffs. The latter have already started in relation to the steel sector.

OLD SCHOOL INDUSTRY TARGETS TO DEFEND NEW WAVE TECHNOLOGY

Chart segments U.S. imports of machinery products from China by product (HS-4). Source: Panjiva

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