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.
The Trade War Show — Renewed for season three with showdown set for October
The U.S.-China trade war can be seen through the lens of President Trump's keen sense of media-friendly populism as a series of TV seasons using the latest U.S. trade data for July.
The pilot episode in early 2017 featured a 100-day negotiation that ended with a deal for China to buy more agricultural and energy products. While Chinese imports of those products rose 20.7% in calendar 2017 from the previous year, there has been a subsequent collapse to half their 2016 levels in the 12 months to July 31.
The first full season of the trade war featured the section 301 investigation from August 2017 through to the first application of tariffs in July 2018. That review has sought to address Chinese business and political practices as well as cut the U.S. trade deficit with China. Yet, the deficit in the 12 months to July 31 reached $397 billion, or 14.3% higher than in calendar 2016.
Season two featured an escalation of tariffs interspersed with periods of negotiations. U.S. imports of list 1 and 2 products — where tariffs were applied in July and August 2018 — fell 20.2% and 50.3% year over year, respectively, in July 2019. List 3 products, where duties were introduced in September 2018 and increased in May, have fallen by 32.0%.
Season three, which kicked off with an escalatory exchange on Aug. 23, is set to see tariffs widen to cover virtually all bilateral trade by mid-December. In the 12 months to July 31, U.S. exports of tariff-afflicted products to China fell 27.4% year over year, or by $27.7 billion. Meanwhile, Chinese exports to the U.S. fell 13.8%, or by $34.9 billion. Neither side has really "won" the trade war so far. Additionally, several non-tariff measures are also being considered by both sides.
Yet, the stage is set for improving relations with sub-ministerial negotiations from mid-September and ministerial level talks in early October. Those could hurdle the politically sensitive 70th anniversary of the PRC. A de-escalation of tariff increases due on Oct. 1 may be needed to ensure successful talks, though.
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Johnson Health lifts inventories before relocation to battle tariffs
Johnson Health Tech. Co. Ltd. CEO Jason Lo has stated that the fitness equipment firm's forthcoming factory in China will mean it "will have a greater advantage over our Chinese rivals because they will be hurt by the latest tariffs" on imports to the U.S. Lo also stated that manufacturers "have to be like nomads" in shifting production to remain competitive.
In the near-term though, the firm appears to be pursuing a stockpiling strategy. Panjiva's shipping data shows U.S. seaborne imports associated with the firm from China climbed 67.8% year over year in August. The firm may also be hedging against a delay in its new Vietnamese factory — imports from Taiwan over the same period increased 116.3%.
(Panjiva Research - Consumer Durables)
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Vale's iron ore return favors China, still not back to historic levels
Bulk shipping rates, based on the Baltic Dry Index, have surged 96.4% year-to-date and by 319% since their February trough. That may partly be down to a shortage of shipping capacity as Vale SA's exports of iron ore have resumed. The mining firm's exports of iron ore from Brazil climbed 93.3% in July from their April trough, though a 3.4% sequential increase versus June suggests the recovery may be slowing.
Shipments to China have taken priority — the country accounted for 79.3% of shipments in July — while exports by other producers including Cia. Siderúrgica Nacional and Anglo American PLC fell sequentially.
(Panjiva Research - Metals & Mining)
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Dorian delays Maersk, CMA-CGM shipping through Norfolk
Hurricane Dorian continues to weaken after disrupting shipping in Florida and the southeast, though it still may present a life-threatening storm surge and dangerous winds through southern Virginia and has led to the closure of the port facilities in Norfolk. As with most regional ports, shipments through Norfolk dip in September — Hurricane Florence likely drove a 6.5% drop in shipments in September 2018 comapred to August 2018.
The closure has delayed the arrival of container ships operated by CMA CGM SA, A.P. Møller - Mærsk A/S and Orient Overseas (International) Ltd.. Major users of the delayed vessels in the past 12 months into Norfolk have included firms as diverse as drinks maker Red Bull GmbH, medical device manufacturer Zimmer Biomet Holdings Inc. and autoparts producer Iochpe-Maxion SA.
(Panjiva Research - Logistics)
ADM, Louis Dreyfus fail to make much hay from trade war's soybean battle
The global trade in soybeans has been disrupted by the U.S.-China trade war. That can be seen in the 63.3% year-over-year drop in U.S. exports to China in the 12 months to July 31 despite an 8.3x rise in the month of July compared to a year earlier. American farmers have instead switched exports to Mexico, Japan and the EU.
Exporters from Argentina are reportedly withholding supplies due to new capital controls. Brazilian suppliers, meanwhile, have struggled to capitalize, with exports in the 12 months through July down 3.9% year over year, including a 33.6% slump in the month of July.
The major exporters from Brazil, led by Archer-Daniels-Midland Co. and Louis Dreyfus Co. Holdings B.V., did better in the past 12 months with a 5.5% and 2.9% rise, respectively, though neither could avoid the July downturn.
(Panjiva Research - Agriculture)
Adani, Wilmar may lose out as India tries to wave off palm oil import surge
The Indian government will apply increased duties to Malaysian palm oil imports to protect the domestic refining industry. Indian imports of palm oil dropped 11.3% year over year in the first quarter, but surged in April and May as a result of increased Malaysian supplies.
The imports from Malaysia climbed 41.0% year over year in April and by 109% in May, partly at the expense of shipments from Indonesia. Panjiva's shipping data shows the largest importer of palm oil to India from Malaysia in the 12 months to May 31 was Adani Wilmar Ltd., followed by the local subsidiary of PT Sinar Mas Agro Resources and Technology Tbk. Both also source palm oil for India from other countries, so they may be able to weather the higher tariffs.
(Panjiva Research - Agriculture)
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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