Posts

china usa

China-US trade war won’t affect global container supply chains

The trade dispute between the US and China could have fewer ramifications across global container supply chains than initially thought.

According to new research from Drewry, although the transpacific trade, particularly headhaul eastbound, is expected to be hit hard by the introduction of billions of dollars’ worth of new tariffs, the way China has established itself as the world’s factory means other trades should be less affected.

“Potential losers in this trade war will be those countries that provide the raw materials and semi-finished goods to China that go into the re-export of the final products to the US,” said the analyst. “The US itself could suffer as China uses up some of its exports for re-exports.”

It added: “The thing is that China has developed its manufacturing capacity to such an extent that it barely needs inputs from the rest of the world to support its exports, which should limit the collateral damage.”

Drewry explained that the tariffs were likely to increase demand for manufacturing in countries other than China, which, due to the way many production processes typically involve several tiers of manufacturing with intermediate goods also being shipped around the world, container lines could actually see a volume fillip on other trades from the dispute.

“As final goods sourcing moves to countries currently without the same manufacturing eco-system as China, they will require more intermediate inputs, meaning more production fragmentation.

“Where those links establish themselves will determine how beneficial the process is for shipping lines. More intra-Asia trade will boost demand for shipping services and put a greater onus on smaller feeder ships, whereas greater regional trade in North America and Europe would be less advantageous due to overland opportunities,” it said.

“There will be some short-term disruption to the container market as new trading links are developed, but further fragmentation of production will boost the need for shipping, assuming demand levels are sustained. For the foreseeable future, China will remain the world’s container export hub, albeit a slightly smaller one,” it concluded.

And a senior freight forwarding executive told The Loadstar at the recent Transport Logistic show in Munich that the trade dispute could present a boon for forwarders willing to help shippers design their supply chains.

Essa Al-Saleh, chief executive of Agility, said: “Trade will follow the path of least resistance. People will find other opportunities. Some movements are opportunistic because of trade barriers, some are more long-term, based on labour, regulations or a combination of both.”

“Global supply chains are becoming more complex – there are lots of locations that can add more value, and there are some trends towards making supply chains shorter, some of it due to cost, or predictability.

“Costs are going up in China, but they have built a great ecosystem, that gives it a certain stickiness, so it’s hard to move out. Tariffs will have a negative impact on Mexico. Forwarders don’t just offer port-to-port; it’s end-to-end, and they can add value and service in between.

“You need agility and resilience in the supply chain – products may shift, or there may be quotas – the key thing is to understand the pain point: forwarders are always in demand, it’s never all doom and gloom; it’s about engagement with clients,” he explained.

Source: The Loadstar

china usa

U.S. begins collecting higher tariffs on Chinese goods arriving by sea

The United States began collecting higher, 25% tariffs on many Chinese goods arriving in U.S. seaports on Saturday morning in an intensification of the trade war between the world’s two largest economies and drawing retaliation from Beijing.

U.S. President Donald Trump imposed the tariff increase on a$200 billion list of Chinese goods on May 10, but had allowed a grace period for sea-borne cargoes that departed China before that date, keeping them at the prior, 10% duty rate.

The U.S. Trade Representative’s office in a May 15 Federal Register notice set a June 1 deadline for those goods to arrive in the United States, after which U.S. Customs and Border protection would begin collecting the 25% duty rate at U.S. ports. The deadline expired at 12:01 a.m. EDT on Saturday

The tariff increase affects a broad range of consumer goods, and intermediate components from China including internet modems and routers, printed circuit boards, furniture, vacuum cleaners and lighting products.

Earlier on Saturday, China began collecting higher retaliatory tariffs on much of a $60 billion target list of U.S. goods. The tariffs, announced on May 13 and taking effect as of midnight in Beijing (1600 GMT), apply additional 20% or 25% tariffs on more than half of the 5,140 U.S. products targeted. Beijing had previously imposed additional rates of 5% or 10% on the targeted goods.

No further trade talks between top Chinese and U.S. negotiators have been scheduled since the last round ended in a stalemate on May 10, the same day when Trump announced higher tariffs on $200 billion of Chinese goods and then took steps to levy duties on all remaining Chinese imports.

China ordered the latest tariff increases in response to Trump’s move.

Trump has accused China of breaking a deal to settle their trade dispute by reneging on earlier commitments made during months of negotiations. China has denied the allegations.

Beijing has grown more strident in recent weeks, accusing Washington of lacking sincerity and vowing that it will not cave to the Trump administration’s demands.

Its rhetoric has hardened particularly since Washington put Chinese company Huawei Technologies Co Ltd on a blacklist that effectively bans the firm from doing business with U.S. companies.

Source: Reuters.com

china usa

U.S. and China Near Deal That Could End Most U.S. Tariffs

The U.S. and China are close to a trade deal that could lift most or all U.S. tariffs as long as Beijing follows through on pledges ranging from better protecting intellectual-property rights to buying a significant amount of American products, two people familiar with the discussions said.

Chinese officials made clear in a series of negotiations with the U.S. in recent weeks that removing levies on $200 billion of Chinese goods quickly was necessary to finalize any deal, said the people, who weren’t authorized to talk publicly about the deliberations. That’s the amount the Trump administration imposed after China retaliated against the U.S.’s first salvo of $50 billion in tariffs that kicked off the eight-month trade war.

One of the remaining sticking points is whether the tariffs would be lifted immediately or over a period of time to allow the U.S. to monitor whether China is meeting its obligations, the people said. The U.S. wants to continue to wield the threat of tariffs as leverage to ensure China won’t renege on the deal, and only lift the duties fully when Beijing implemented all parts of the agreement.

As part of the ongoing talks, the U.S. asked the Chinese not to retaliate or bring World Trade Organization cases in response to U.S. tariffs that could be imposed to enforce the deal, according to a person familiar with the negotiations.

Stocks in Europe and Asia advanced on optimism about a deal, with the Stoxx Europe 600 Index rising 0.4 percent. The offshore yuan gained 0.2 percent.

Dates for a summit between President Donald Trump and counterpart Xi Jinping have yet to be agreed, according to officials from both countries who declined to be named. The Wall Street Journal, which reported earlier that the U.S. and China were close to finalizing a trade pact, reported the summit could happen around March 27.

Plans for a signing ceremony have been complicated by Xi’s need to lead China’s annual National People’s Congress and to make other foreign trips.

U.S. and Chinese officials “have conducted fruitful and intensive consultations and made important progress on many issues of common concern,” Zhang Yesui, a spokesman for the National People’s Congress, the annual session of China’s legislature, told reporters in Beijing on Monday. “We hope that the two sides will continue to hold consultations and reach a mutually beneficial and win-win agreement,” he added.

China’s Offer

China is offering to lower tariffs on U.S. farm, chemical, auto and other products, the Journal said, citing people familiar with the situation. Specifically, China would buy $18 billion in natural gas from Houston-based Cheniere Energy Inc., one of the people familiar with the matter said.

As part of a deal, China is pledging to speed up the timetable for removing foreign-ownership limitations on auto ventures, and to reduce tariffs on imported vehicles to below the current rate of 15 percent, the newspaper reported.

A senior administration official cautioned on Sunday that a decision had not yet been made over lifting the U.S tariffs. The official also said a debate was continuing inside the administration with Trump unlikely to make a decision before a deal was closer to being done, likening to situation to the debate over what to do with U.S. sanctions in the lead-up to last week’s summit with North Korea’s Kim Jong Un.

Asked during a congressional hearing last week whether a deal would see a lifting of U.S. tariffs, Robert Lighthizer, the China hawk now leading the talks with Beijing, would say only that was China’s desire.

Source: Bloomberg.com

china usa

China-US trade war tariffs force manufacturing moves

The failure of the US and China to agree on trade at the weekend makes further tariffs on Chinese goods to the US seem increasingly likely.

But while most economists agree that trade wars are ineffective and harmful, some players in the logistics industry are seeing opportunities – mostly in air freight, which typically benefits from chaos and change.

The likelihood of 25% tariffs on a wide range of goods has seen the ocean freight industry surprisingly busy in the past couple of weeks, as exporters look to move goods to beat the 1 January deadline.

But ultimately, shippers and logistics service providers are looking to new manufacturing possibilities – and therefore supply chains – in South-east Asia.

Large numbers of US companies are talking of shifting manufacturer. Robert Rucker, CEO of The Tile Shop, said in an October earnings call: “With the Chinese tariffs, we are looking at moving. And right now: we’re at roughly 50% of our product coming out of Asia, my goal is to get that closer to 25% or even lower, and the potential for doing that right now is very good. We’re not waiting.”

James Simms, CFO of Vicor Corp, said in his earnings call: “The cost, going forward, may not be inconsequential, given the volume of components currently sourced from China. We are seeking non-Chinese alternate vendors.”

And Todd Bluedorn, CEO of Lennox International: “I’m not sure the Chinese tariffs are going to be short term. And so we’re taking action to sort of avoid the tariffs by moving to South-east Asia and other low-cost countries that can meet our requirements.”

It will take a while for companies to build new supply chains, and in the meantime carriers are already benefiting.

“It is the peak for China to the US, but it’s compounded by tariffs,” said Robert van de Weg, vice president sales and marketing for Volga-Dnepr Group. “There is a build up.

“A lot of this inventory was supposed to go by ship, but it’s going by air to be on time.

“If tariffs have a general effect on the economy and trade flows, there will be some change before it settles down into the new equilibrium.”

The question for carriers will be when to add capacity – and to where.

“South-east Asia could see new trade flows, Cambodia, Malaysia, Vietnam, Indonesia and Bangladesh,” said Mr van de Weg. “There will be more opportunities out of South-east Asia and a degree of chaos, as the supply chains won’t be ready. Plus, factories will have to move. However, I don’t believe the change will be sharp and sudden.”

AirbridgeCargo (ABC) is the V-D group’s Asia specialist and is currently looking at developing its South-east Asian network.

“We are looking at increasing the frequencies and maybe opening new markets. You don’t want to be too early, you don’t want to be too late. Don’t miss the boat, but don’t lose your shirt. You need to be prepared to go in. Increasing frequencies to existing points is the first step.”

ABC currently operates to Ho Chi Minh, Hanoi, Singapore and Taipei.

Mr van de Weg added: “Bangladesh is interesting. We have made progress on ACC3 certification there. We also think Indonesia and Thailand have potential. There is more and more infrastructure and more overland networks with Cambodia and Vietnam, and there is also a strong import market.”

Air freighter volumes appear to be rising in the region, with Thailand seeing international volumes this year above the market average growth, at more than 6%.

Cambodia’s Phnom Penh saw 24% growth, year on year, in cargo volumes in September. The Vietnamese civil aviation authority is forecasting 18% growth annually in freight volumes each year up to 2020.

Source: The Loadstar