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Easing USMCA duties could relieve pork exports; commodities caught in China spat

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.

Easing of retaliatory tariff spells relief for JBS' Swift Pork, Tyson Foods
The U.S. government has agreed to remove tariffs on steel and aluminum exports from Canada and Mexico, which in turn will remove their retaliatory duties. While removing one hurdle to the ratification of the U.S.-Mexico-Canada Agreement, concerns persist in the U.S. House of Representatives regarding labor and pharmaceutical rules.

The impact of the tariffs has been largely felt equally. Mexico's exports of metals to the U.S. fell 9.5% year over year in the three months to end-March, while its imports of U.S. metals and agricultural products fell 8.7%. Mexican imports of U.S. agricultural goods fell 18.7%, led by a slump in pork products.

Among the largest U.S. pork exporters, JBS SA's Swift Pork and Tyson Foods Inc. suffered 31.9% and 32.4% declines in shipments, respectively. However, No. 2 exporter, Seaboard Corp., saw exports falling only l 0.3%.

(Panjiva Research - Agriculture)

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Evonik, Dow in a bind as China retaliates with increased tariff rates
The Chinese government has retaliated against rising U.S. tariffs by hiking its own duties on about $60 billion of U.S. exports. This means that the $21.6 billion of products imported in the 12 months to March 31 will face increased duties, to 25% from 10%. Imports of those products already fell 18.8% year over year in the first quarter of 2019, compared to a 38.5% drop during the quarter for products on which 25% duties were applied in July and August 2018.

Meanwhile, chemical binders by exporters, such as Evonik Industries AG and Dow Inc., declined 24.5%. However, commodity exporters may bear the heaviest burden. Exports of LNG dropped 83.0% in the first quarter as China's state-owned energy firms cut their purchases, while the shippers of oak lumber dropped 43.4%.

Not all products have experienced a decline in the period. U.S. exports of personal computer components increased 15.6% and laptop computers surged 56.2%.

(Panjiva Research - Policy)

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US declares Daimler, Toyota national security threats as it exercises tariff leverage exercised
The decision by the Trump administration to delay Section 232 duties on imports of passenger vehicles, drivetrain components and electrical parts will be a major point of leverage in wider trade negotiations with the EU and Japan. A deadline of 180 days was set to carry out such negotiations, with Canada, Mexico and South Korea already effectively exempt under prior trade deals.

Such imports of vehicles and components from outside USMCA and South Korea were worth $124.9 billion in the 12 months to March 31, led by $94.6 billion of completed vehicles. The most exposed automakers will be those with significant parts imports for assembly in the U.S. Factories in the U.S. that are not "American owned" are not considered national security interests.

Daimler AG and Toyota Motor Corp. have already reduced their U.S. seaborne imports of parts covered by the review by 29.4% and 5.9%, respectively, in the three months to April 30. However, the declines may reflect falling U.S. sales as much as tariff concerns.

(Panjiva Research - Autos)

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Shoemakers face unpleasant wobble if tariff hikes are delivered
Over 170 footwear manufacturers, ranging from Germany's adidas AG to the U.S.' Under Armour Inc. have warned that the Trump administration’s proposed 25% duties on all Chinese imports could hurts consumers, companies and the U.S. economy. Initially, prices would be increased, while supply chain shifts could take a number of years.

China accounted for 52.3% of all U.S. footwear imports in the 12 months to April 30, which totaled $26.9 billion, compared with 62.9% of 2013's total. Most of the slack has been taken up by Vietnamese supplies.

Midsize importers in the U.S. may face the most pressure. Deckers Outdoor Corp. has already cut seaborne imports from China by 15.4% in the three months to April 30, while Skechers U.S.A. Inc. and Steven Madden Ltd. have increased shipments 1.8% and 5.1%, respectively.

(Panjiva Research - Apparel)

Singapore sings a sadder song as Asian exports lower the tone
The government of Singapore has cut its GDP forecast for 2019, citing a "risk of further escalation of trade conflicts," particularly between the U.S. and China, which have worsened recently. Singapore has seen five straight months of falling exports, culminating in a 3.6% drop in April. That's a common position across Asia with six of eight countries in the region reporting lower exports in April, including China. Asia's slowdown may be a sign that the global export decline experienced in February and March could have continued in April.

(Panjiva Research - Policy)

The most read research from Panjiva's first 3 years
Panjiva Research has reached a milestone, with 5,000 articles published over the past three years. The most read research across the reports have focused on the trade policy actions of the Trump administration.

Reports have ranged from the impact of China hawks on the president-elect's policy-making in 2016 to NAFTA negotiation pain-points in 2017 and corporate reactions to tariffs in 2018. So far in 2019, Panjiva's attempts to identify the winners and losers of the trade war have garnered the most attention among readers. Industrial supply chain analyses form the heart of Panjiva's coverage, starting with the first research report, which looked at Tesla's supply chain in May 2016.

(Panjiva Research - Most Read)

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.

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. S&P Global Market Intelligence is not responsible if those links are unavailable later.