Chinese exporters scramble on tariffs

China’s exports rose 11.3 percent year-on-year in June, fueling hopes of stability in the world’s second-largest economy. (AFP)
Updated 16 April 2018
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Chinese exporters scramble on tariffs

  • Cixin Group manager Wang Liqiang: “We are considering manufacturing as many ball bearings as possible for the US market before the imposition of tariffs.”
  • Some companies are looking at ways to hide their Chinese origin by shipping goods through other countries.

Beijing: Faced with possible US tariff hikes, one of China’s biggest ball bearing makers, Cixin Group, is considering plans to rush shipments to American customers before the increase makes its sales unprofitable.
The company in the eastern city of Ningbo is among exporters of goods from motorcycle parts to electronics that are scrambling to cope with President Donald Trump’s higher duties by shipping early, raising prices or finding new markets.
The 25 percent increase would turn Cixin’s profits to losses in the US market, which takes 30 percent of its exports, according to Wang Liqiang, a company manager.
“We are considering manufacturing as many ball bearings as possible for the US market before the imposition of tariffs,” said Wang. “We can do it by working overtime.”
Some companies are looking at ways to hide their Chinese origin by shipping goods through other countries.
“Maybe customers will buy from South America, and then South America sells to the US,” said Yvonne Yuan, a sales manager for Shenzhen Tianya Lighting, a manufacturer of LED bulbs.
Trump said higher duties on $50 billion of Chinese goods are meant to punish Beijing for stealing or pressuring foreign companies to hand over foreign technology.
The plan targets goods US officials say benefit from improper Chinese policies including machinery, industrial components and aerospace, telecoms and other technology.

 

Trump left time to negotiate. A public comment period runs through May 11, with a hearing scheduled May 15.
Economists and Chinese officials say the tariff hike’s overall impact on China should be limited. But for exporters that depend on the US market, the potential costs are alarming.
Knock-on effects could greatly increase the impact, Moody’s said in a report. It said that Chinese manufacturers that supply inputs to targeted sectors would see reduced demand and more pricing pressure. Manufacturing and processing of metals and metal products, as the key input sectors for technology-product manufacturing, would be hurt the most.
Chinese exporters supply most of the world’s mobile phones, personal computers, televisions, toys and other light manufactured goods.
Many factories are struggling with higher costs and slowing demand. China’s total exports last year rose 7.9 percent, down from the heady double-digit rates of the past decade.
The US buys about 20 percent of China’s exports. But Americans are especially important to exporters because they buy electronics and other high-value goods.
Some exporters already are reeling from previous US tariff increases of up to 500 percent on washing machines, solar modules and some metal products, meant to offset what the Trump administration says are improper subsidies.
Others are confident American customers cannot do without them.
Makers of motorcycle components plan to use that leverage to ask buyers to split the cost if tariffs rise, said Pan Jianle, an official of the Motorcycle Parts Association in Wenzhou. She said they export worldwide, but the US is their biggest market.

FASTFACTS

China’s total exports last year rose 7.9 percent. The US buys about 20 percent of China’s exports. Some exporters already reeling from US tariff hikes.


Brent crude oil rises for a sixth day as supplies tighten amid strong demand

Updated 57 min 29 sec ago
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Brent crude oil rises for a sixth day as supplies tighten amid strong demand

  • US West Texas Intermediate crude futures were at $68.98 a barrel, up 34 cents
  • The potential of renewed US sanctions against Iran is pushing prices higher

SINGAPORE: Brent crude oil rose for sixth day on Tuesday, passing $75 a barrel, on expectations that supplies will tighten because fuel is rising at the same time the US may impose sanctions against Iran and OPEC-led output cuts remain in place.
Brent crude oil futures climbed to as high as $75.20 a barrel in early trading on Tuesday, the highest since Nov. 27, 2014. Brent was still at $75 a barrel at 0311 GMT up 29 cents, or 0.4 percent, from its last close.
Brent’s six-day rising streak is the most since a similar string of gains in December and it is up by more than 20 percent from its 2018 low in February.
US West Texas Intermediate (WTI) crude futures were at $68.98 a barrel, up 34 cents, or 0.5 percent from their last settlement. On Thursday, WTI rose to as high as $69.56, the most since Nov. 28, 2014.
Markets have been lifted by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) which were introduced in 2017 with the aim of propping up the market.
The potential of renewed US sanctions against Iran is also pushing prices higher.
Stephen Innes, head of trading for Asia/Pacific at futures brokerage OANDA said new sanctions against Tehran “could push oil prices up as much as $5 per barrel.”
The US has until May 12 to decide whether it will leave the Iran nuclear deal and re-impose sanctions against OPEC’s third-largest producer, which would further tighten global supplies.
“Crude prices are now sitting at the highest levels in three years, reflecting ongoing concerns around geopolitical tensions in the Middle East, which is the source of nearly half of the world’s oil supply,” ANZ bank said.
“Oil strength is coming from Saudi Arabia’s recent commitment to get oil back up to between $70 to $80 per barrel as well as inventory levels that are back in the normal range,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.
OPEC’s supply curtailments and the threat of new sanctions are occurring just as demand in Asia, the world’s biggest oil consuming region, has risen to a record as new and expanded refineries start up from China to Vietnam.
One of the few factors that has limited oil prices from surging even more is US production, which has shot up by more than a quarter since mid-2016 to over 10.54 million barrels per day (bpd), taking it past Saudi Arabia’s output of around 10 million bpd.
As a result of its rising output, US crude is increasingly appearing on global markets, from Europe to Asia, undermining OPEC’s efforts to tighten the market.