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.
17 days of beans, car tariffs are a slow start to 90 days of talks
The Chinese government has reportedly started to deliver on commitments to buy U.S. agricultural products and cut automotive tariffs following the recent meeting between President Xi Jinping and President Donald Trump. It may be too early to be overly optimistic for the results from negotiations that have 77 days remaining.
A 1.5 million-ton order of soybeans compares to U.S. exports to China in 2017 of an average of 2.66 million tons per month, i.e. just 17 days of deliveries. Similarly, a cut in automotive import tariffs to 15% from 40% only reverses tariffs applied in July and has yet to be confirmed by the Ministry of Commerce.
U.S. exports of cars to China by all automakers, which have been led by BMW AG, Daimler AG and Ford Motor Co., in October were just 10,000 vehicles, the lowest since July 2012. That represented a decline from an average 19,400 in the 12 months to July 31. For electric vehicles, where exports to China have been led by Tesla Inc., there were 482 vehicles shipped versus 1,400 in the 12 months to July 31.
Samsung chooses India over China for various tariff reasons
Samsung Electronics Co. Ltd. is closing one of its major Chinese smartphone factories and shifting production to India. Other phone manufacturers could follow suit, particularly if the U.S. government applies duties to mobile phones in March 2019.
Indian imports of mobile phones from China have already fallen by 14.4% year over year in the 12 months to Oct. 31 to $2.59 billion. That's likely the result of the earlier imposition of "Make in India" tariffs on phones and reduced tariffs on parts to encourage production in India. Samsung Electronics has already started to gear up operations. Its Indian imports of telecoms equipment parts increased 24.7% year over year in the third months to Sept. 30, while its shipments of semiconductors climbed 41.5%.
Oil, Chinese discounting could slash U.S. import growth
The crash in oil prices experienced in November may lead to the slowest rate of U.S. import growth since October 2016. Import price inflation slowed to 0.7% year over year in November from 3.3% in October. At the national level, that can be seen most obviously in the 0.8% price deflation for imports from Canada versus the 6.8% inflation seen in October.
Deflation of 0.3% year over year of import prices from China, from an inflation of 0.3% in October, would suggest exporters are cutting prices to offset the impact of tariffs on their market share. The 4.2% rise in seaborne shipments from China to the U.S. would suggest the strategy is working. Imports from all countries rose by just 1.9% year over year in October as a result of slower European shipments. Adding seaborne import growth to the 0.7% price inflation would suggest total import growth of just 2.6% year over year is possible, which would be the slowest since October 2016.
South Korean subsidies may become part of Hyundai, GM supply chains
The South Korean government may launch financial support measures for the automotive parts industry in response to weak car sales and forthcoming U.S. Section 232 duties. U.S. imports of auto parts from South Korea have rebounded recently with a 9.2% increase in the three months to Nov. 30 compared to a year earlier. That followed a prolonged downturn. The big automakers appear to be following different strategies. Hyundai Motor Co.'s shipments climbed 15.0% over the same period, perhaps indicating a build-up of inventory ahead of tariffs. General Motors Co., by contrast, has slashed its shipments by 20.5%, possibly in connection with its recently announced manufacturing plant closures.
Brighter performance from Longi, Jinko Solar with supply chain switch
U.S. solar power installations fell 15% year over year in the third quarter, according to the Solar Energy Industries Association, with import tariffs blamed for the downturn. U.S. imports of solar power equipment fell 78.1% compared to a year earlier in the three months to Nov. 30, though shipments from Malaysia and South Korea have fallen by a smaller amount. The leading exporter to the U.S. from those two countries was Hanwha Q CELLS Co. Ltd., despite having cut shipments by 64.7%. That's been offset in part by increased shipments by LONGi Green Energy Technology Co. Ltd. and JinkoSolar Holding Co. Ltd. Both firms have swapped production from other countries to increase exports to the U.S. from Malaysia and South Korea by 70.5% and 23.6%, respectively.
Where LA goes, NY may follow as Chinese imports fade
U.S. seaports saw a marked slowdown in inbound volume growth in November with a 3.7% year-over-year increase, compared to a 7.9% improvement on average in the prior three months. The slower growth was due in large part to a drop in shipments from Europe rather than China, despite the wide-ranging application of tariffs. The most significant loss of momentum was in Los Angeles where there was a 5.2% year-over-year decline in imports following a 10.4% rise in the prior three months. East Coast ports did better, with New York seeing a 12.0% surge compared to a 10.6% average in the prior three months. The differential may be driven by the timing of deliveries from China, which arrive seven to 10 days later in New York than in Los Angeles. Shipments from China to Los Angeles and Long Beach fell 4.0% year over year in November but those to New York climbed 20.4%.
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.
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