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China Has Energy and Drive For a Trade War With Trump

Ags - Fruit/Veg 107 Ags - Grains/Beans 237 Ags - Meat/Dairy 192 China 2527 Cons. Discr. - Autos 918 Consumer Staples 589 Energy - Conventional 373 Energy - Crude Oil 254 Energy - Natural Gas 122 Health Care 233 Materials - Chemicals 160 Tariffs 1613 U.S. 4472

The Chinese Ministry of Commerce has issued two lists of products worth around $50 billion that will have duties applied in retaliation for the Trump administration’s section 301 duties on U.S. imports from China. The first list will have duties applied from July 6 at a rate of 25%. The second list of 114 goods will be held in reserve. This matches the profile outlined by the U.S. section 301 duties, as outlined in Panjiva research of June 15.

Panjiva analysis of the first list shows that it is dominated by agricultural products and cars. The number one item on the list is soybeans where exports were worth $11.3 billion, Panjiva data shows, of 54.9% of America’s global exports of the product in the 12 months to April 30. Unsurprisingly that is followed by sorghum worth $1.1 billion where a separate case had been launched and then cancelled and which accounted for accounted for 86.8% of American exports. More broadly fruit / vegetable exports worth $2.16 billion and meat / fish worth $3.77 billion are also sanctioned.

In the automotive segment shipments of passenger cars to be covered by duties were worth $9.99 billion and accounted for 20.7% of American passenger car exports. Products that are hit more than average on a proportional basis include hybrids (50.8%) and electric vehicles (45.9%).

FARMERS AND AUTOMAKERS FACE THE FIRST WAVE OF CHINA’S RETALIATION

Chart segments U.S. exports of products covered by China’s “list 1” tariffs by product (HS-6) for the 12 months to April 30.  Source: Panjiva

The timing of the implementation of the second list is at yet uncertain, but will likely be tied to the 60 day review period the American government is following for the second half of its own list. Furthermore the Trump administration has also warned of another list of products worth up to $100 billion that may be sanctioned if China does implement its current retaliatory proposals.

The majority (54.2%) of China’s second list is led by energy products worth $9.73 billion, led by crude oil worth $5.9 billion and propane worth $1.6 billion. The former is important in that it accounts for 20.8% of America’s exports of crude and was supposed to be a key area of increased exports as part of the earlier detente between the two countries.

Other notable areas include the healthcare sector and in in particular medical devices ($985 billion) and diagnostic chemical reagents ($823 million).

WILDCATTERS AND SCIENTISTS FACE THE SECOND WAVE OF CHINA’S RETALIATION

Chart segments U.S. exports of products covered by China’s “list 2” tariffs by product (HS-6) for the 12 months to April 30.  Source: Panjiva

Much of the second list was not included in China’s initial pronouncements on duties, with both the energy and medical devices newly included. Other products added to the new list appear focused on those where there would be a maximum effect on American exporters of those products including pistachios ($649m where China represented 45.3% of exports) and pork offal ($541 million, 69.2%).

TARGETS CAREFULLY CHOSEN FOR MAXIMUM IMPACT ON AMERICAN EXPORTERS

Chart segments U.S. exports included in China’s retaliatory tariffs that weren’t in the original series announced in April 2018, by product (HS-6) for the 12 months to April 30.  Source: Panjiva

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