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Trump's $19.9B tariff haul; Crane's pumps win in exemption exercise

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.

Trump's $19.9B tariff haul could be dwarfed by extra China, auto duties
The U.S. Treasury Department collected $5.1 billion of customs duties in February, up 89.8% compared to a year earlier. The increase came as a result of new tariffs applied on washing machines, solar panels, steel, aluminum and around $250 billion of Chinese exports. The total tax income from duties reached $55.5 billion in the 12 months to Feb. 28, up $19.9 billion compared to a year earlier.

That could increase by about $30 billion annually if U.S.-China trade talks fail and tariff rates are increased to 25% from 10%. A decision from President Donald Trump due by May 17 could add section 232 duties to automotive imports at rates of as much as 25%. U.S. imports of vehicles and parts from outside Mexico and Canada, which are exempt assuming the U.S.-Mexico-Canada, or USMCA, agreement. is ratified, were worth $168.5 billion in 2018, implying a potential additional tariff income of $42.2 billion in a full year.

(Panjiva Research - Policy)

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Crane's pumps, Musk's crushers win in latest round of tariff exemptions
The U.S. government has granted a second round of exemptions to tariffs on Chinese imports, though only 33 products and 107 petitions are covered, out of more than 13,000 applications made since July 2018. That means only 17.1% of final assessments for leniency on tariffs applied in July have so far received an exemption. Decisions regarding tariff put in place in August have not been made, while a system of assessment for September tariffs has yet to be put in place.

Products covered by the latest exemptions were worth $3.54 billion in 2018. The largest category by value were pump impellers, where imports by users including Crane Co.'s pump manufacturing division, which received the exemption, rose 22.2% year over year in the fourth quarter of last year to reach a record high.

Another winner from the latest exemptions is rock crushing machinery imported by Elon Musk’s The Boring Co. Its total U.S. imports were worth $80 million in 2018 but just 6.7% came from China. Others include the U.S. manufacturing subsidiaries of Standex International Corp. and Mitsubishi Heavy Industries Ltd.

(Panjiva Research - Policy)

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ZIM volumes set to zoom, profits zapped by lease payments
ZIM Integrated Shipping Services Ltd. reported a 12.1% year-over-year increase in revenue in the fourth quarter of 2018. The growth included a 9.0% rise in average shipping rates, in line with its container-line peers. The firm’s volume growth of 4.0% is likely to accelerate in 2019 after signing a route-sharing agreement with the 2M Alliance of A.P. Møller - Mærsk A/S and MSC Mediterranean Shipping Co. SA.

ZIM already recorded an 18.0% year-over-year increase in its U.S.-inbound volumes in the first two months of 2019, driven by a reallocation of vessels to China-U.S. routes. Yet, like most other shipping companies, ZIM has seen declining profitability, with its quarterly EBITDA margin of 5.0% down from 6.3% a year earlier. The firm cited significant trade-related uncertainties, suggesting a turnaround in profitability may be some way off.

(Panjiva Research - Logistics)

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Williams Sonoma ready for the worst as furniture crumbles
Williams-Sonoma Inc.'s earnings guidance includes an increase in U.S. duties on Chinese exports of furniture to 25% from 10%, amid ongoing trade talks between the two countries. According to CFO Julie Whalen, the U.S. retailer's profitability could be put under pressure as a result.

U.S. furniture retail sales fell 2.8% year over year in January after rising 3.3% in 2018. Tariffs and slowing sales are leading U.S. companies to reorient their supply chains away from China. In the first two months of 2019, U.S. seaborne imports from China fell 7.7% year over year whereas those from Vietnam — from the likes of Williams Sonoma as well as Rooms To Go.com Inc. and Raymours Furniture Co. Inc. — surged 25.3%.

(Panjiva Research - Consumer Durables)

Tariff risks stalk tomatoes, USMCA deal could pass later than hoped
The potential imposition by the U.S. of 17.5% duties on Mexican tomato exports may cause problems for the ongoing passage of the U.S.-Mexico-Canada Agreement. The International Trade Commission is reviewing the tariff suspension agreement, which may also fall foul of revised USMCA trade investigation rules for seasonal produce. The risks for Mexican tomato exporters and potential for intervention by the Mexican government are high given the U.S. accounts for 99.9% of export sales, worth $2.52 billion, in 2018. An increase in tariffs could also hurt U.S. consumers given Mexico represented 85% of U.S. imports in 2018.

(Panjiva Research - Agriculture)

North Korea normalization dims, China's $2B trade surplus persists
Prospects for a normalization of North Korea’s relations with the rest of the world and removal of trade sanctions may have dimmed. North Korea temporarily stopped liaison office operations with South Korea after the U.S. sanctioned two Chinese logistics firms for bypassing trade restrictions. That may overshadow relations between President Trump, who has blocked more extreme sanctions, and China President Xi Jinping during ongoing trade negotiations. Sanctions appear to be holding — China’s bilateral trade with North Korea is down 10.0% year after year in the first two months of 2019 — through a trade surplus of more than $2 billion on a 12-month trailing basis suggests financial relations are being maintained.

(Panjiva Research - Policy)

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