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Insight | Time: May 15 2019 6:03PM
How much will China-US trade war influence on PSF export
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Global market saw “black swan” previously. The US president Trump announced to impose additional tariffs suddenly. After that, wild fluctuation happened to stocks, commodity and other derivatives, especially financial market. The US formally raised tariffs on $200 billion worth of Chinese imports from 10% to 25% as of May 10, including chemicals. 

So how will it impact PSF export?

From the chart below it can be seen that the exports of Chinese PSF to the US took up a large share. In 2018, those to US ranked the first with a share of 16%. Theoretically, the escalated trade war should have had significant influences on PSF export, but in fact, it was much smaller than expected. According to downstream market, traders showed obvious concerns as soon as the news released in May, but there was no large change in their operation. So the news may just have more impacts on market players’ mindset. In short run, traders may consider trading environment more deeply, such as the currency stability of trading countries and other risks about geopolitics. But at present, Chinese PSF has obvious advantages.

In terms of cost side, the increase of tariff actually enlarged export cost. However, from the chart below, it can be seen that the exchange rate of offshore renmibi to US dollar depreciated about 12% from 6.24 in Feb 2018 to nearly 7. The large depreciation of renminbi apparently offset the negative impacts caused by tariff increase, so the actual influence on cost was limited. In addition, Chinese government introduced related policies to support the export, further reducing the impacts brought by additional tariff. In May 2019, renminbi plunged as soon as the news about raising tariffs released, which was very similar to that in 2018. Therefore, the operation on exchange rate is likely to revive.

Source: Bloomberg Finance

It is also noteworthy that the exports are generally transferred to surrounding countries, which can also spread risks of trade decline to some extent.

So if the impacts brought by trade war are not large, how to explain the expectation of later export decline?

PSF price fluctuated largely year to date and overall fall is seen, leading to rapid decrease of FOB prices under USD. The uncertainties of PSF price result in more cautious operation of foreign trader and make them control trading volume more strictly. Besides, the reduction of VAT rate from 16% to 13% as of Apr 1 also led to quick rise of export cost. Many traders rushed to process orders in Mar before the implementation of VAT rate adjustment and thus export volume in Mar improved significantly. But it mainly benefited from the orders placed in advance. As a result, the decline of export data later may be not only caused by trade war. 

In long run, the slide of export is inevitable, but it will be mainly due to the PSF industry itself and fall of demand instead of trade war. Therefore, rational attitude to trade war is needed. The influence on mood is much more than that in fact.

Amid escalated China-US trade war, Chinese textile and apparel export enterprises will suffer obviously. More details are presented in the report Sino-US Textile and Apparel Trade Relations & Comprehensive Impacts of the Trade War

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