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.
Editor's note: The Supply Chain Daily will take a break tomorrow and return on Jan. 10 with the first of a series of 2020 outlook reports.
Wrong news at the right time shows success of Trump's trade policies
U.S. trade activity fell for a third straight month in November 2019 with a 2.0% year-over-year slide. Services activity continued to improve while goods fell once again. Both the total and goods deficits fell to their lowest since October 2016.
While that is not a positive from an economic theory perspective, it suggests the Trump administration's tariff-led trade policies are proving successful in achieving their deficit-led objectives. The goods deficit with China fell 30.4% to $26.4 billion, which should be supportive for relations ahead of mid-January negotiations to complete the "phase one" trade deal.
Similarly, the deficit versus the EU fell 13.5% ahead of mid-January talks between European Commissioner Phil Hogan and U.S. Trade Representative Robert Lighthizer. The drop was the result of imports slipping for the first time in four months — a 13.7% slide in shipments of cars and a 19.7% descent in aerospace imports were the main reasons.
The fly in the ointment was a 24.0% rise in the deficit with Canada and Mexico, though that is unlikely to derail passage of the U.S.-Mexico-Canada Agreement through the U.S. Senate.
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Beans bounce back as US wins the trade war in November 2019
U.S. tariff pressure on China appears to have delivered its desired aims. China has come to the negotiating table and talks to finalize a "phase one" trade deal will resume on Jan. 13. The U.S. trade deficit with China fell 30.4% year over year in November.
Most U.S. import tariffs will remain in place even after the phase one deal is reached. Panjiva's analysis shows that imports of so-called list 1-3 products, where tariffs were applied from July to September 2018, are still in decline with a 35.6% year-over-year slide in November 2019. List 4A products, where tariffs were applied in September 2019, also fell by 29.2% including a 76.0% slump in flat-panel television imports.
Exports to China from the U.S. have also started to improve. The 17.4% year-over-year increase in U.S. exports to China in November — including $1.50 billion of additional exports of products where tariffs were applied in September 2018 — was only the second improvement since July 2018.
Exports of soybeans rose to $1.53 billion in November and crude oil increased by $111 million, compared to zero for both a year earlier. Shipments of American cars to China also rose by 120%, or by $577 million, though the opening of Tesla Inc.'s factory in Shanghai will eat into that growth from January onward.
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Tariffs not needed as Daimler slashes shipments, BMW and VW prove resilient
The U.S. autos sector ended 2019 on a low with a 6.7% year-over-year drop in sales in December. Foreign vehicles bore the brunt of the drop in demand with a 9.5% slide. Automakers do not appear to expect an improvement.
U.S. imports of cars and light trucks fell by 5.9% in November including a 13.7% slide in shipments from Europe with a 27.8% slump in imports from Germany. That has come despite the absence of long-threatened section 232 tariffs in the sector.
Seaborne imports to the U.S. linked to Daimler AG fell the fastest with a 49.1% slump in the fourth quarter overall. Imports linked to BMW AG and Volkswagen AG, meanwhile, have proven more resilient with increases of 95.4% and 18.2%, respectively.
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Adidas, Sumitomo may face disruption from Jakarta floods
Rebuilding has started in the aftermath of the tragic flooding in Jakarta, with damages estimated at $1.15 billion as businesses begin to count the cost on their supply chains. The largest export lines from the area 50 kilometers around Jakarta to the U.S. include tires, printers and footwear. All three had already been in decline with tire shipments down 3.2%, printers off by 11.1% and footwear having dropped 32.4% year over year in the three months to Nov. 30, 2019.
Most tire makers in the region saw a downturn including a 20.2% drop in shipments by Sumitomo Rubber, though Michelin SCA has been an outlier with 84.0% growth. Adidas AG's exports of footwear from the affected area already fell by 82.6% in the three months to Nov. 30. In electronics, exports by both Samsung Electronics and Seiko Epson have been in decline.
One bright spot has been exports by Mattel Inc., with seaborne shipments to the U.S. linked to the firm having improved by 20.9% — the toy maker may need to adapt its supply chain as it recovers from the flooding.
(Panjiva Research - Industries)
Kerosene, fuel oil refloat Canada's export growth as China spat continues
Canada's trade activity growth was an anemic 0.9% year over year in November following the Canadian Pacific rail strike. Exports to the U.S. generated an expansion with a 3.6% increase, driven by a 59.7% surge in refined oil products, including jet kerosene and heavy fuel oil.
The need to ensure continued export growth provides another reason for Parliament to approve the U.S.-Mexico-Canada Agreement when it returns in late January. Exports to the EU rose 18.0% — possibly buoyed by the CETA trade deal — while political hostilities with China led to a continued 19.2% slide.
Nonetheless, Canada was the second-fastest growing export market in the Americas in November 2019, after Argentina. Total exports from the region fell 2.5% due to weaker exports from the U.S. as well as commodity markets, including Brazil.
Hasbro, Mattel find growth in India, government looks to tackle quality
The Indian government reportedly plans to restructure the tariff code for toys as part of a push to improve the quality of imports. There has been a surge in India's toy imports recently, with a 24.6% yearly jump in shipments in the 12 months to Sept. 30, 2019. This is led by shipments from China, which represented 26.5% of the total. Imports by the major brand owners have grown quickest.
Shipments linked to Hasbro Inc. climbed 221% while Mattel's rose by 61.4%, though growth for both has slowed recently. Reliance Industries' Lifestyle retail unit has seen a reduction of 8.9% in the past 12 months while smaller, independent importers — where the quality concerns may lie — have increased their imports.
(Panjiva Research - Consumer Durables)
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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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