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What to watch at UNGA; Apple, Barco win tariff reprieves

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What to watch at UNGA; Apple, Barco win tariff reprieves

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.

9 issues to watch during UN General Assembly week
Heads-of-state meetings at the UN General Assembly from Sept. 24 could yield progress in five major areas of trade policy, with another four that are unlikely to be addressed or make only a little headway.

A U.S.-Japan mini-deal will be the centerpiece and will focus on agriculture. Yet there is a need to address the status of forthcoming U.S. automotive tariffs, which may cover the 29.7% of Japanese exports to the U.S. accounted for by passenger vehicles by Toyota Motor Corp. and Nissan Motor Co. Ltd. among others, according to Panjiva data.

The U.S. may also reach a mini-deal with India, including returning India's access to the General System of Preferential access of reduced tariffs. The GSP covered 11.5% of India's exports to the U.S. in the 12 months to May 31, while total Indian exports to the U.S. grew by just 6.0% in the three months to July 31, compared to 12.9% in 2018.

A third U.S. deal could be an agreement to start negotiations with Brazil. Such talks may prove challenging given the highest tariffs are in agricultural products and that may make a deal unpopular with powerful farming interests.

Japan and South Korea have an opportunity to de-escalate their trade spat, which appears to be taking a toll with bilateral trade down 9.4% year over year in August. A solution requires political — rather than just economic — agreements.

The future of the WTO is in the balance, with the dispute panel's quoracy due to lapse in December. Canada and the EU are leading the charge for a long-term deal, though from a practical perspective there are 42 cases currently held up in the dispute process.

Four big issues that are unlikely to make progress at UNGA include: the U.S.-China trade war; potential worsening relations between the EU and U.S.; post-Brexit trade deal-making; and the Asia-Pacific RCEP trade deal.

With the weighted average of global exports among 15 countries down by 2.8% in August after falling activity in the first and second quarters, the need for new trade deals has rarely been so pressing.

(Panjiva Research - Policy)

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Apple, Barco win tariff relief as trade war hopes dim
Signs of a de-escalation in the U.S.-China trade war may be fading. The latest round of talks yielded a bland statement from the U.S. side, while President Trump has stated that he is not interested in a partial deal and Chinese trade ministers canceled a visit to U.S. farms.

In the meantime, the day-to-day work of the trade war continues with tariff exemption approvals for 331 products made by the U.S. for imports from China. The exemptions cover 12.0% of the range of products targeted for list one to three tariffs, though are focused on specific companies. Notably, the products targeted had a faster-than-average decline in imports of 19.3% year over year in the 12 months to July 31 compared to 13.1% for all list one to three products, according to Panjiva data.

The largest product line is PC graphics cards where total imports across all suppliers was $2.92 billion in the 12 months to July 31 — with Apple Inc. and Barco NV having won exemptions. Apple has also won exemptions for its imports of PC chassis — where total imports across all suppliers were worth $2.60 billion — as well as trackpads and power supply units. Other exemptions were granted to LED manufacturer FOHSE and wiring loom producer Toyodenso Co.,Ltd..

(Panjiva Research - Tech. Hardware)

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Britax competitive disadvantage shows tariffs unsafe at any speed
Kids' car seat manufacturer Britax Group Ltd. is facing margin pressure from tariffs on the parts it purchases to make seats in the U.S., while its overseas competitors have received an exemption from tariffs on completed car seats. That led Robert McCutcheon, head of Britax's Americas business, to state "our incentive now would be to move our production back overseas."

The firm has applied for an exemption on parts but this could take some time to receive. In the meantime U.S. seaborne imports associated with Britax from China dropped 9.0% year over year in the three months to Aug. 31, though they still represent 78.2% of total imports. Newell Brands Inc., owner of the Graco brand, has only trimmed its Chinese imports of completed car seats by 1.0% while retailer Target Corp. has increased them by 59.8%.

(Panjiva Research - Consumer Durables)

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BHP, Codelco win Chile-to-Japan copper market share from Antofagasta
Japanese smelter Regalito Copper Corp (Pan expects the global deficit in copper supply versus demand to continue into 2020 with demand growth of 1.5% only being modestly outstripped by a 1.7% rise in supply. There is evidence of declining demand in Chilean copper exports though, with a 4.9% year-over-year drop in the second quarter due to weaker demand from China.

Japanese demand increased modestly with a 2.4% rise over the same time period. There has also been a fragmentation in supply market share from Chile to Japan. Antofagasta PLCs share of shipments fell to 23.2% in the 12 months to June 30, 2019, from 46.4% in calendar 2016. It lost ground to BHP Group, which rose to 22.3% from 19.0%, and Codelco which climbed to 8.2% from 3.1%.

(Panjiva Research - Metals & Mining)

Trade war impact on Seattle, Tacoma waning but far from out of the woods
Container shipping through the ports of Seattle and Tacoma, Wash., increased 2.0% year over year in August, though much of that was down to the repositioning of empty containers. The shipping of full containers fell 1.8%, with imports down 2.6%. The latter reflected in part the impact of the U.S.-China trade war, though shipments from Canada also fell 0.9%. The forestry industry is partly to blame for the reduced Canadian traffic, with imports associated with Millar Western Industries Ltd. and Canfor Corp. down 55.3% and 42.2%, respectively.

Exports of loaded containers from Seattle and Tacoma improved however, up 0.9% after a 5.2% slump in the prior three months — a similar pattern to that seen in Long Beach, Calif. Taking the four big West Coast ports together there was still a 2.1% decline in August, though that was slightly better than the 3.3% fall in the three months to July 31.

(Panjiva Research - Logistics)

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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