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Servers and Phone Switches Are China’s Biggest Risks From Trump’s New Tariffs

China 2527 Industrials - Aero/Defense 168 Industrials - Capital Goods 439 Info Tech - Comms Equip 163 Info Tech - Tech Hardware 589 Tariffs 1613 U.S. 4472

The decision by the U.S. government to apply duties on Chinese exports of as the result of its section 301 review of IP practices raises the question as to whether it will apply significant pressure on China? As outlined in Panjiva research of March 23 the $50 billion of products to be covered will include a mixture of technology, machinery and aerospace products, though detailed product lists aren’t yet available.

Panjiva data shows the U.S. accounts for 22.2% of China’s major technology exports in the computing, telecoms and semiconductor sectors. That’s led by exports of laptop computers ($32.3 billion in 2017) and mobile phones ($31.3 billion). Outside those products shipments of server-type computer is the largest line worth $3.88 billion. Given the centrality of servers to IT infrastructure they may be a potential target.

LAPTOPS AND PHONES TOO BIG TO APPLY TARIFFS TOO, SERVERS AREN’T

Chart segments Chinese exports of selected technology products by product (HS-6) and destination market, based on 2017 dollar value of shipments. Source: Panjiva

The machinery sector can be very broadly defined, but taking industrial-focused products the U.S. accounted for 19.1% on average. Among the top 20 products the U.S. share was most significant – and hence leverage to change China’s behavior – are in electric fans (34.6%), telecoms network components (28.6%, which would also fit with national security concerns) and AC electric motors (26.3%)

FOCUSED RISKS IN MACHINERY SECTOR FOR CHINA

Chart segments Chinese exports of selected machinery products by product (HS-6) and destination market, based on 2017 dollar value of shipments. Source: Panjiva

Aerospace is the smallest sector by value ($1.11 billion) but may more of a problem proportionally, with the U.S. accounting for 28.0% of exports, followed by the EU at 17.5%. It will certainly limit the potential for exports of the Comac C919, though this is aimed more at the domestic market and so probably a bigger issue for Boeing’s sales in China than vice versa.

AEROSPACE MAY LOSE ALTITUDE IN THE U.S.

Chart segments Chinese exports of aerospace products by destination market. Source: Panjiva

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