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Trade war stakes still high after auto tariff cut; Pemex has a port problem

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.

China helps BMW, Tesla; trade war stakes remain
China's Ministry of Finance has confirmed it will reduce duties on imports of U.S. auto industry products, including both cars and parts, to 15% from 40%. Bayerische Motoren Werke AG and Tesla Inc. have both responded by reversing earlier price increases, which may help rebuild their sales in China. Yet, the reduction is only planned to continue until March 1 and as such does little to reduce the long-term risks from the trade war.

In the three months ended Oct. 31, U.S. vehicle exports to China fell 49.7% year over year, equivalent to $1.26 billion. By contrast, U.S. imports from China rose 34.0%. Similarly, U.S. exports of auto parts to China climbed by 9.2%, while its imports from China surged 21.4%.

The latter likely reflects concerns about U.S. automakers and dealers about the effect of the ongoing Section 232 national security review of the auto industry by the Trump administration. The net result of the relative fall in vehicle exports and rise in parts imports has inflated the U.S. trade deficit with China by $2.03 billion year over year in the three months ended Oct. 31.

(Panjiva Research - Autos)

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Pemex's problems today may be US exporters' troubles later
Gasoline supplies into the Mexican port of Pajaritos have been delayed by weather and a lack of storage capacity, though national oil supplier Petróleos Mexicanos SA de CV, or Pemex, has yet to scale back purchases. Congestion at the port is an ongoing issue and can be seen by import growth of just 2.3% year over year in the three months to Oct. 31 compared to 8.8% for the nation as a whole.

Over the longer term, imports will likely decline as the new government will require Pemex to build more refineries in Mexico. That will have a particular impact on U.S. exporters, which accounted for 91.2% of Mexican imports in the 12 months to Oct. 31. Similarly, Mexico accounted for 29.6% of all U.S. refined oil exports over the same period.

(Panjiva Research - Energy)

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PVH trims sourcing from Bangladesh, H&M weaves in more
Strikes at as many as 50 garment factories in Bangladesh may harm the country's position in U.S. supply chains. U.S. apparel imports from Bangladesh reached $5.47 billion in the 12 months to Oct. 31, after increasing 7.6% year over year. The largest importer, in the 12 months to Nov. 30, was H & M Hennes & Mauritz AB (publ) with 9.2% of seaborne shipments after increasing its imports from Bangladesh by 44.8% year over year in the three months to Nov. 30. Jeans-maker. Levi Strauss & Co., which was the second largest at 6.0%, has also increased imports.

PVH Corp., the owner of the Calvin Klein brand among others, was the third-largest importer at 3.6%. The firm has reduced its reliance on Bangladesh after cutting seaborne imports by 58.8% and increasing shipments from India, Sri Lanka, Indonesia and China instead. The latter may need to be reviewed if the U.S.-China tariff war widens after March.

(Panjiva Research - Apparel)

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Party over in California as China tariff war takes the punchbowl away
Container handling at California's big three ports of Los Angeles, Long Beach and Oakland fell 3.4% year over year in November. Export handling slumped by 9.4% versus 3.4% for imports. If repeated at the national level, that could have resulted in another marked surge in the U.S. trade deficit. Los Angeles led the decline with a 9.9% drop in volumes handled, including an 8.8% slide in inbound traffic. The drop in exports and imports can in part be blamed on the tariff war between the U.S. and China. While there has been a pause in the escalation of tariffs, California's imports from China declined by 3.0% year over year in November after a 4.8% rise in the prior three months.

(Panjiva Research - Logistics)

Almond retribution delayed as Indian holds back steel tariff response
The Indian government has postponed its retaliatory duties against U.S. Section 232 tariffs on steel and aluminum for a fourth time. Indian imports of products targeted for tariffs from the U.S. in the 12 months to Sept. 30 were worth $1.61 billion, of which 42.1% were accounted for by almonds. India's steel and aluminum exporters have nonetheless suffered from U.S. duties. U.S. seaborne imports from India were down 26.5% in the three months to Nov. 30 compared to a year earlier. That may have hurt smaller exporters more than larger corporations, as implied by the surge in shipments to the U.S seen by both Hindalco Industries Ltd. and Vedanta Ltd.

(Panjiva Research - Policy)

'Make in India' working as trade growth slips
India's international trade growth slowed in November to just 2.9% year over year versus an average of 14.9% in the prior three months. Both imports and exports fell, though a 3.0% drop in non-oil imports suggests that "Make in India" tariffs designed to promote domestic manufacturing are working. Indeed imports of electronics, where most tariffs are focused, rose by just 0.3%. The slowing growth overall mirrors a similar trend seen in South Korea and China and may extend once the recent drop in oil prices takes effect.

(Panjiva Research - Policy)

Singapore slowdown caused by oil as regional trade growth slows
Cargo handling through Singapore's ports dropped 3.3% year over year in November, in large part due to a 6.9% slump in handling of oil tankers. Importantly though, there was also a slowdown in the growth of containerized freight throughput to 1.3% from an average of 6.8% in the prior three months. The U.S.-China trade war won't be helping. Shipping companies using Singapore's ports may be trying to compensate by cutting services to maintain utilization rates per vessel. That's shown by a 1.0% drop in container vessel calls and 2.2% improvement in twenty-foot equivalent units per vessel in November compared to a year earlier.

(Panjiva Research - Logistics)

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.