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.
Ford, Daimler near end of long road of USMCA uncertainty
A revision to the U.S.-Mexico-Canada Agreement has finally been accepted by the U.S. House Democrats. That ends a more-than-12 month discussion that had left regulatory uncertainties hanging over labor law, environmental policy, enforcement processes and the pharmaceutical and steel sectors.
The saga isn’t over yet. Passage through the U.S. House of Representatives needs to be completed. The U.S. Senate won’t take the bill up until after impeachment. Both the Mexican and Canadian parliamentary authorities have to pass it too, and the latter might not do so until February.
The revised pharmaceutical rules — removing a standardization of patent lives for certain drugs — could unlock further growth in U.S. pharma imports. Shipments into the U.S. from Canada and Mexico of pharmaceuticals already surged 16.8% year over year in the 12 months to Oct. 31 while exports fell by 1.4%.
In the autos sector, all steel will now have to be "melted and poured" in North America, reducing access for intermediate product imports from outside the continent. There's already been signs of a decline in U.S. steel imports by automakers. That's partly a response to uncertainty from the now-shelved section 232 review of the industry and impact on imports from outside North America.
U.S. seaborne imports from outside Mexico and Canada which are associated with Volkswagen AG and Daimler AG have fallen by 1.4% and 17.6%, respectively, in the three months to Nov. 30. Meanwhile imports linked to Ford Motor Co. and Toyota Motor Corp. have been declining for most of the past year.
Airbus, Leonardo face tariff headwind from latest WTO subsidy ruling
The U.S. government has launched consultations regarding a second round of retaliatory tariffs on EU exports relating to a World Trade Organization ruling on subsidies provided by the EU to Airbus SE. While the process is WTO-ratified, it may nonetheless add to tensions between the EU and U.S. Relations are also be affected by tariffs set to be imposed by the U.S. in relation to digital services taxes.
The new round of tariffs — where consultations are set to run through January — is focused on the aerospace, food and beverage sectors. Aerospace is the major target with $9.66 billion of imports in the 12 months to Oct. 31 being covered. There have been some signs of stockpiling with a 36.0% year-over-year increase in the three months to Oct. 31.
The tariffs could have a significant impact on the assembly and parts operations of Airbus SE and Leonardo S.p.a. U.S. seaborne imports linked to Airbus rose by 7.0% year over year in October while Leonardo's climbed 20.0% higher — both have since declined though. Component maker Voestalpine AG has been late to the party with a drop in shipments in October and surge in November.
WTO less appealing as appeals body breaks, time to paper over the cracks
The deadline for resolving the future of the WTO's dispute settlement appellate body, or AB, passed on Dec. 10. That's been the result of the U.S. blocking new AB appointments due to its concern about the AB expanding its reach well beyond that originally intended.
The WTO's Secretary General, Roberto Azevêdo, has launched a consultation on what to do next. With unanimity needed for reform, its likely no decisions will be made during 2020. While raising the risk of unrestrained protectionism, alternative arbitration approaches — such as that proposed by the EU and potentially supported by China — could provide a relief valve for trade tensions.
One case that may be addressed by the outgoing AB is Canada's March 2016 case against U.S. tariffs on Canadian supercalendered paper which is used in magazine publishing. U.S. imports of the products fell by 16.3% year over year in the 12 months to Oct. 31 versus the 12 months before the AB panel considering the case was launched in July 2018.
That's part of a longer-term decline that has seen imports drop by 35.8%, compared to the 12 months ahead of tariffs originally being applied in March 2015. The case shows both the lengthy nature of WTO reviews and the resulting supply chain uncertainties for importers including PT Sinar Mas Agro Resources and Technology Tbk and Resolute Forest Products Inc..
Ports suffer from weaker US demand, west does worst
U.S. ports continue to feel the negative effects of the U.S.-China trade war as well as a weakening of U.S. demand for imports more broadly. Total seaborne, inbound shipments of containerized freight fell by 5.6% year over year in November.
The West Coast ports of Los Angeles and Seattle have been hit hardest with drops of 14.9% and 33.4%, respectively. The West Coast outlier was Tacoma with a 2.9% rise due to imports from China which actually improved.
On the East Coast, most ports have seen flat- or improving trade. Norfolk was the east coast outlier with a 9.5% drop which was driven by a 27.2% slump in shipments from China.
Both Norfolk, Va., and Los Angeles have also reported declining exports, which bodes ill for total trade activity in the U.S. in November. Official U.S. trade figures are due near the end of the month.
Sugar imports from Mexico depend on tariffs as US harvest turns sour
A weak harvest could cut U.S. sugar supplies by 10% in 2019, requiring increased imports from Brazil and Mexico among others. U.S. imports of sugar already jumped 17.4% year over year in October after a decline of 7.3% in the past 12 months.
Shipments from Mexico represented 37.1% of the total in the past 12 months, but their status is unclear due to a recent court intervention in relation to a tariff-suspension agreement between the U.S. and Mexico.
The leading importer of sugar to the U.S. from Mexico in the 12 months to Sept. 30 was CSC Sugar LLC, with 29.3% of the total, followed by Sucres et Denrées SA with 15.6% and ED&F Man Holdings Ltd. at 6.3%. CSC and Sucden have both increased their shipments recently, while ED&F Man's have been cut. All three may need to review their supply chain strategies as the tariff case proceeds.
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Christopher Rogers is a senior researcher at Panjiva, which is 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.
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