trending Market Intelligence /marketintelligence/en/news-insights/trending/5a9gzid2Sa9gHK8kmVT09Q2 content esgSubNav
In This List

Trump puts autos review in high gear; supply chain strategies to tackle tariffs

Podcast

Next in Tech | Episode 50: InfoSec spending up, again…

Blog

Broadcast deal market recap 2021

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Volume of Investment Research Reports on Inflation Increased in Q4 2021


Trump puts autos review in high gear; supply chain strategies to tackle tariffs

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.

Hyundai and Daimler rush as Trump puts autos review into high gear
President Trump shortly could receive the results of the section 232 national security review of the automotive sector. The timing is a surprise given trade talks with the EU and Japan — which have temporary exemptions — are underway. But near-term action may be designed to pre-empt any moves by the new Congress to change the section 232 rules.

There already are signs of imports of auto parts accelerating, with year-over-year growth of 15.2% in October to a record high level, excluding Canada and Mexico. Hyundai Motor Co.'s imports, led by shipments from South Korea, have grown the fastest at 46.3%. That suggests the company does not see the Korea-U.S. trade deal providing a defense. Daimler AG, meanwhile, has increased its imports, predominantly from Germany, by 27.1%. Not all automakers are taking such an aggressive stance. Volkswagen AG's imports increased by just 5.8% although it can rely on its Mexican factories to help with supplies to the U.S.

(Panjiva Research - Policy)

SNL Image

Supply chain strategies firms are using to cope with tariffs
Tariffs have become a fact of life for many American companies. Panjiva's analysis of third-quarter conference calls from 369 S&P 500 companies indicates 142 discussed the impact of, and strategies for dealing with, U.S. tariffs on Chinese exports and imports of steel and aluminum. Of those, 102 also had discussed tariffs in their second-quarter earnings calls. A detailed review of 24 calls shows a variety of strategic responses.

Panasonic Corp. has accepted it may need to take a hit to profits in its contracts with Tesla Inc. while FMC Corp. is seeking a government exemption from tariffs in the first instance. Cooper Tire & Rubber Co.'s price increases are being followed by its peers as it attempts to pass on to customers the tariffs, which are, in effect, a tax increase.

Price rises also have to cover increases in other costs, as Terex Corp. has found, requiring significant cost cutting plans in order to maintain group-wide profitability. That cost cutting can include switching suppliers to those outside China as The Timken Co. has already done, increasing imports from India.

A more extreme example, particularly for firms with long supply chains, such as Bayerische Motoren Werke AG, is to localize assembly. Others, such as Steven Madden Ltd., are not waiting for tariffs to be imposed on their products and are already diversifying their sourcing.

(Panjiva Research - Industries)

SNL Image

More pleas for help as tariff exemption requests rise
The U.S. government continues to receive a stream of requests for exemptions from tariffs placed on Chinese exports. As of Nov. 8, there were 10,393 requests for exemptions from the 25% duties applied on July 6 and Aug. 24, up from 8,241 requests on Nov. 1. The requests came from 1,102 companies, up from 798 a week earlier. As a result, 45.6% of all products covered by duties are subject to appeals.

Only 3.5% of filings currently are in the stage before final approval while 7.9% have been denied. The largest product group covered by new appeals are electronic circuits outside of memory chips ($771 million of imports from China in the past 12 months) including a request from automaker Toyota Motor Corp. Imports of those products In September fell to the lowest level since February 2016.

(Panjiva Research - Policy)

SNL Image

Yang Ming the latest liner to suffer fuel-price profit decline
Container line Yang Ming Marine Transport Corp. reported an 8.2% year-over-year increase in third-quarter revenue, including a 9.2% improvement in volume handled. That implies average achieved revenue per container fell by 1.0%. Global container shipping rates fell by a similar amount, suggesting Yang Ming has taken a relatively passive approach to market share. A similar effect can be seen in its U.S.-inbound volume, which rose 6.1% in the third quarter compared to an industry average of 7.6%. Like the rest of the sector, however, a surge in fuel prices resulted in a drop in profitability. Yang Ming's EBITDA margin dropped to 2.3% versus 6.4% the same period a year earlier. Management has indicated fleet renewal and a logistics joint venture could help to rebuild profit.

(Panjiva Research - Logistics)

West does best as trade war bypasses ports
The widening U.S.-China trade war has yet to have a marked effect on volume handled by America's largest ports, which rose 10.7% year over year in October to a record 2.67 million TEUs. The surge in volume was fastest on the west coast with Seattle/Tacoma rising 19.0% and LA/Long Beach rising 15.6%. East coast ports fared less well, perhaps indicating Chinese exporters have attempted to complete deliveries into the U.S. as soon as possible in case higher duties or wider coverage is applied. For example, Norfolk's imports from China fell 13.0% and Houston's rose by just 0.6%, suggesting fewer diversions via the Panama Canal.

(Panjiva Research - Logistics)

J&J's China-local strategy shows U.S. drug export risks
Johnson & Johnson will invest $580 million to build two new factories in China. J&J China's chairman, Vladimir Makatsaria, has indicated that the Chinese government is improving intellectual property controls for healthcare products following U.S. government tariffs designed to restrict Chinese IP theft. Tariffs so far have had little impact on China's pharmaceutical exports to America, which rose 41.6% year over year in the third quarter. Exports from the U.S. to China are not subject to additional duties but may fall if more U.S. manufacturers follow J&J's localization strategy. Chinese imports from the U.S. climbed 98.4% year over year in the third quarter and were 3x the size of its exports to America.

(Panjiva Research - Healthcare)

Christopher Rogers is a senior researcher at Panjiva, which is part of S&P Global Market Intelligence. 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 7:30 a.m. ET. Some external links may require a subscription. Links are current at the time of publication time. S&P Global Market Intelligence is not responsible if those links are unavailable later.