The Supply Chain Daily provides a curated overview of Panjiva's research and insights covering global trade policy, the logistics sector and industrial supply chains and draws from global shipping and freight data.
Nissan, Tata join the list of automakers facing COVID-19 disruption
The spread of COVID-19 continued last week. While over 99.1% of cases originated in China, disruption to manufacturing spread across global automotive supply chains.
The autos industry had already been struggling. There was a 7.6% drop in total Japanese auto exports in December and a 5.8% slide in U.S. imports of vehicles from all countries in the same month because of falling sales.
Nissan Motor Co. Ltd. cut production of the Rogue SUV in its Kyushu factory in Japan. The company's total exports from Japan fell 10.8% year over year in December while U.S. seaborne imports linked to the company dropped 9.2% in January compared to a year earlier.
It is not just Japanese auto firms that have been impacted. Tata Motors Ltd.'s Jaguar Land Rover factory in China closed because of the outbreak, which may eventually choke off the firm's shipments to the U.S., which rose 24.3% year over year in January.
Carousel passes LVMH, Constellation by as U.S. aero retaliation deepens
The U.S. government increased tariffs on imports of large civil aircraft from the EU to 15% from 10% as part of a regular review of the duties imposed as part of a WTO-mediated aerospace subsidy dispute involving Airbus SE. The tariffs, imposed in October, may have led to an acceleration of deliveries of aircraft — imports from the EU excluding the U.K. jumped 21.4% year over year in the fourth quarter.
The range of products covered by the retaliatory duties, which were set at 25%, is largely unchanged. Prune juice has been removed from the list and butcher knives added, but shipments of both have been minimal. That would suggest the Trump administration wanted to show the "carousel" process, which can destabilize supply chain planning, is possible but is not yet being used as a weapon in the trade war.
U.S. imports of food and beverages from the EU covered by the tariffs fell by 29.8% and 21.1% year over year respectively in the fourth quarter, suggesting the duties have had a significant impact.
Among beverage manufacturers, shipments by LVMH Moët Hennessy - Louis Vuitton Société Européenne fell fastest. Panjiva's seaborne shipping data shows imports linked to the firm fell by 25.5% year over year in the three months to Jan. 31. Shipments by Constellation Brands Inc. and Diageo PLC fell 14.8% and 9.0%, respectively, while Pernod Ricard SA's bucked the trend with a 34.8% surge.
SM Line, PIL realign as competition concerns conclude
Container-lines operating U.S. seaborne import routes saw a 2.7% year over year drop in volumes in January. The 2M Alliance of A.P. Møller - Mærsk A/S and MSC Mediterranean Shipping Co. SA saw the worst performance with a 7.1% slide in traffic. The Ocean alliance — led by COSCO SHIPPING Holdings Co. Ltd. — fell 2.1% and Hapag-Lloyd AG's and ONE's THE Alliance slipped 4.1%.
The EU waived through a four-year extension in the block exemption from competition rules for the shipping alliances. SM Line Corp. will replace Hyundai Merchant Marine Co.Ltd. in cooperating with 2M. SM Line already saw a 22.7% surge in shipments to the U.S. in January, with 70.1% of its volumes routed from China. COSCO and ONE are offering a joint Europe-to-U.S. service that crosses alliances.
Pacific International Lines meanwhile exited the Transpacific market. That may be because 90.1% of traffic on the U.S.-leg of its services came from China, where volumes are set to continue to be depressed by ongoing tariffs and in the near term by COVID-19 related disruptions.
Trump's budget indicates major trade war de-escalation
U.S. Treasury income from tariffs climbed 4.4% year over year in January to reach $6.92 billion. A widening of the tariff base on imports from China was the main reason, with the total income from tariffs on China applied since July 2018 having reached $4.09 billion in January.
The Trump administration's 2020/21 budget document anticipates a 41.3% drop in customs duty income in the 2021/22 fiscal year compared to the current year. That would indicate a drop in tariff coverage or rates is included in the forecast.
Most tariffs remain in place under the phase 1 trade deal with a trimming of duties on so-called list 4 tariffs only likely to cut the total U.S. tariff take by 6.7%.
The budget figures therefore suggest the administration expects a phase 2 trade deal to be completed with a significant reduction in tariff rates — or that U.S. companies will accelerate their diversion of supply chains away from China.
Burden-sharing alive and well as U.S import prices from China hit 12-year low
U.S. import prices excluding food and fuel fell by 0.8% year over year in January, the 13th straight decline. Imports from China fell by 1.7% with the resulting average import price index having reached its lowest since May 2007.
With most tariffs set to remain in place under the phase 1 trade deal between the U.S. and China, burden-sharing — where import prices are lowered as exporters absorb part of their buyers' tariff costs — is continuing.
Machinery import prices from China were unchanged, ending a period of inflation, while furniture prices fell 2.3%. Prices in the apparel sector meanwhile, where tariffs were cut to 7.5% from 15% on Feb. 14, increased by 1.1%. The latter suggests burden-sharing will be scaled back when tariffs are removed.
Christopher Rogers is a senior researcher at Panjiva, a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence.
The Supply Chain Daily has an editorial deadline of 5:30 a.m. ET. Some external links may require a subscription. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.