Trump’s Trip in 5 Charts: Message Delivered, Contracts Signed but No Deals — Panjiva
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Trump’s Trip in 5 Charts: Message Delivered, Contracts Signed but No Deals

China 1793 Cons. Discr. - Autos 676 Industrials - Aero/Defense 134 Japan 386 South Korea 388 Trade Deals 708 U.S. 3362 Vietnam 160

President Donald Trump ended his extended Asian trip to Japan, South Korea, China, Vietnam and the Philippines with a message that “the rules (of trade) have changed” had been passed on to leaders in the region. While a significant announcement will be made by the White House on November 15 according to Bloomberg, it is worth recapping the key points from the trip.

Japan – No bilateral deal: The first leg included a meeting with Prime Minister Abe of Japan. Unsurprisingly the issue of trade was addressed in the context of the U.S. deficit, but no agreement on bilateral trade talks was reached. The likelihood of such a deal is low, and in any event would be covered by the ongoing process of trade discussions between Vice President Pence and Deputy Prime Minister Aso.

A specific deal on autos is possible, increasing U.S. access by cutting Japanese import regulations. Panjiva data shows U.S. exports to Japan of completed autos have been growing, with a 12% increase in the past quarter on a year earlier. However, imports remain 141x larger, suggesting Vice President Pence has a lot of work to do yet.

JAPANESE AUTOS MUCH BIGGER IN AMERICA

Chart segments U.S. exports of completed passenger vehicles by destination market (left hand axis) to total imports from Japan (right hand axis)  Source: Panjiva

South Korea – No fireworks, more missiles: President Trump’s meeting with President Moon did not result in any trade-deal fireworks, with “productive discussions” on trade resulting in amendments to KORUS “as soon as possible”. The U.S. trade deficit with South Korea may also be addressed, temporarily, by “billions of dollars” of arms sales by the U.S. to South Korea, though no firm orders were announced.

South Korean imports of American military systems and jets reached $11 billion in the past year vs. Japan’s $4 billion. Both have ordered Aegis in the past, with 2015 orders worth $1.9 billion and $1.5 billion respectively. A repeat of both would boost total U.S. year-to-date export sale approvals by 7%, Panjiva analysis of DoD data shows.

WAITING FOR THE NEXT BIG ORDER

Chart compares monthly U.S. exports of arms and military vehicles to military aircraft on monthly basis, segmented by destination market. Source: Panjiva

China – $253 billion of deals, but no deal:  As expected, President Trump’s visit to China has been accompanied by the signing of several commercial deals, but has not featured a big reset in trade relations. The $253 billion value of deals announced is impressive when compared to the $269 billion annual trade deficit the U.S. holds with China, but includes a mix of long-term investments and multi-year investment deals.

While it is easy to be skeptical, several deals are significant. A $37 billion jet purchase program for Boeing is equivalent to 55% of annual U.S. exports of jets to China if spread over five years. Qualcomm’s three year mobile phone semiconductor deal is equivalent to a 37% rise in exports of those products, though the U.S. is still just 4% of total Chinese imports. Soybean exports will also continue to grow, with new volumes adding 31% in sales to China on top of the 51% growth seen in the past 12 months.

A broader change in trade relations requires resolution to America’s section 301 review of Chinese intellectual property practices and China’s dispute at the WTO over how it is treated in trade cases.

MAINTAINING ALTITUDE

Chart segments Chinese imports of aircraft by country of origin. Source: Panjiva

Vietnam – Following China’s lead: President Trump’s meeting with Vietnamese Prime Minister Nguyen saw the President repeat his administration’s trade-deficit centric approach to policy in wanting to “get rid of the trading imbalance”. As was the case in China though there were corporate deal signings (of around $12 billion), but no movement on a bilateral trade deal. The U.S. trade deficit with Vietnam has climbed 20% annually for the past five years, and has peaked in September at an annualized $38 billion.

EVER UPWARDS FOR U.S. TRADE DEFICIT WITH VIETNAM

Chart shows balance of U.S. exports less imports (deficit equals positive figure) vs. Vietnam on a monthly (dotted) and 12 month average (solid) basis. Source: Panjiva

APEC – Preaching to Xi’s choir: Back-to-back APEC speeches by the leaders of America and China underlined their fundamentally different approaches to trade policy. President Trump called for “fair” (read trade-deficit reducing) bilateral deals. The U.S. trade deficit vs. the big three trade deals under negotiation in Asia (TPP, RCEP and APEC’s FTA) has ballooned in the past year. The deficit vs. RCEP grew 3% to reach $540 billion in the 12 months to September. Meanwhile the deficit with APEC reached $605 billion, or 77% of the total. APEC members will likely reason that they are stronger together when negotiating with America.

IF APEC WAS A CUSTOMS UNION

Chart segments U.S. trade deficit (exports less imports of goods) by region. Solid line shows 12 month trailing average, dotted line the monthly result. Source: Panjiva

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