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.
Trump's 'win' in June makes September tariffs more likely
U.S. international trade in goods and services fell 0.4% year over year in June, according to the U.S. Census Bureau. The main drag in percentage terms came from a 3.5% slide in exports of goods including food and capital goods. Imports inched 1.2% higher, resulting in an increase in the trade deficit for a fourth straight month year over year to reach $55.2 billion.
The biggest drag on trade was with China, with U.S. exports down 16.8% versus imports that fell 12.6%. While that would indicate the U.S. lost out, in dollar terms its exports only fell $1.82 billion year over year whereas imports fell $5.61 billion. That would suggest the U.S. "won" the trade war on balance in June, increasing the likelihood that President Trump will make good on his threat to apply duties to all Chinese exports from Sept. 1.
For context, imports of list 1 and 2 products, where duties of 25% were applied in July and August 2018, fell 38.3% and 33.8% year over year, respectively. List 3 products — with duties of 10% last September and 25% from May — fell 32.6%. The remaining products — where imports were worth $281 billion in the 12 months to June 30 — increased 12.6% year over year in June, leading to the conclusion that the rocky nature of prior rounds of talks have already led companies to start stockpiling.
JAB, Tchibo gulp down more Brazilian coffee as price sours
Global coffee prices slumped 9% in August versus July due to concerns about a harvest-driven glut in supplies from Brazil. Global exports increased by 3.6% year over year in June, marking the 11th month of growth out of the past 12, while shipments from Brazil surged 13.5% higher.
Europe continues to be the largest destination market for Brazilian coffee, accounting for 50.2% of the total in the 12 months to June 30. The fastest growth in imports to Europe from Brazil was by maxingvest ag's Tchibo, according to Panjiva data, with 213.1% year-over-year expansion in June. That was followed by Italian processor Luigi Lavazza S.p.A. with growth of 99.4% and JAB Holding Co. S.à r.l.'s Douwe Egberts with a more modest increase of 17.8%.
Newtrend dumping case shows import volatility caused by investigations
The U.S. Department of Commerce released final determinations regarding glycine dumping from Thailand, specifically referencing Newtrend Food Ingredient. This comes after Thailand was previously cleared in preliminary investigations. The decision is part of a prior case that had applied tariffs against exports from India, China and Japan. India's exports to the U.S. actually surged 181.1% year over year in the three months to May 31, Panjiva data shows, likely due to a cost advantage after receiving the lowest tariffs of the three.
A deeper dive into the Newtrend case shows the impact of the various stages of the investigation. Imports from Thailand surged 253.5% year over year in the three months to July 31, 2018, driving the investigation.
An initial ruling that there was no dumping then led to a further surge in exports of 194.4% in the three months to Dec. 31. Yet Commerce found data had been withheld, leading to a reopening of the case that has now led to 227.3% duties against Newtrend and a subsequent collapse of imports to minimal levels.
Bad month for marine employment may have temporary tariff relief
U.S. logistics and transportation employment growth continued to slow in July with a 2.7% year-over-year increase marking the slowest rate since September 2016. That has been due to a decreasing rate of expansion in the warehousing sector, which at 4.8% posted its lowest growth since April 2014. Heavy haulage sectors including waterborne employment have been in decline, with a 0.4% year-over-year slippage.
There may be a short-term boost from a pre-tariff surge in shipping from China to the U.S. ahead of September, though beyond that volumes may decline. Employment in the marine sector fell 2.1% year over year in the second quarter while seaborne imports increased by just 0.7%. The prospect of more automation — most recently at A.P. Møller - Mærsk A/S's facilities in Los Angeles— may cap employment in the next few years.
Preparing for the storm — July 2019 in 10 charts
Global trade policy activity was relatively limited up until the end of July, leaving our readers to prepare for the onslaught that August has brought. The most-read Panjiva research reports in July were focused on corporate strategies for dealing with tariffs. Our in-depth study of the "first sale" rule for shipping from China to the U.S. via Mexico highlighted Sony Corp. and Cardinal Health Inc. as users of the strategy.
An analysis of the retail sector showed Target Corp. and Best Buy Co. Inc. have yet to cut their imports from China. Plans for the delayed — but now rescheduled — list 4 tariffs on Chinese exports drove Nintendo Co. Ltd.'s quest to reduce its exposure to China. Evidence of the trade war was already apparent from June shipping data, while the freight forwarding sector — and particularly Kuehne + Nagel International AG and C.H. Robinson Worldwide Inc. — faced slowing volumes.
Elsewhere our outlook for the trade war, third-quarter global trade policy outlook and metropolitan area analysis of trade flows also garnered attention.
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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