1,300 Chinese products in eyes of Trump tariffs

Bloomberg

Chinese companies scrambled to assess the impact of proposed US tariffs on 1,300 products as President Donald Trump took a swipe at companies making televisions to dishwashers but spared levies on other goods that might hurt US consumers.
The wide-ranging list of products that may be hit with 25 percent tariffs includes malaria diagnostic test kits, sewing machines and aircraft turbo propellers. Aviation and technology companies were among the groups targeted, while Chinese shoes and clothes makers largely escaped penalties that may have led to price hikes in the US.
“They’re doing it so it looks like they’re taking grandiose action that’s brave and strong, but they don’t want to create a disaster for the US consumer,” said Alice de Jonge, who teaches international trade law at Monash University in Melbourne.
In targeting sectors that Beijing is openly trying to promote, the US is signalling that its strategic aim is preventing China from gaining the global technological leadership that it wants. That has provoked anger in China, while there are doubts that the tariffs will succeed in changing Beijing’s behaviour.
“The list just reinforces that anxiety and alarm that our members, American businesses operating in China, feel about the danger and costs of going down the path of retaliatory tariffs,” said Keith Jarrett, president of the American Chamber of Commerce in Shanghai.
Concerns of a trade war accelerated as China struck back at the US, saying it would levy 25 percent tariffs on imports of 106 US products.
China’s list included soybeans, automobiles and aircraft, among other items.
Many Chinese companies said they were still assessing the impact of the US list that was long and highly specific. The impact on Chinese stocks was muted. Shares of companies with strong ties to the US that escaped tariffs such as Samsonite International SA and Li & Fung Ltd. rebounded on Wednesday. Pharmaceutical stocks jumped, even as Washington targeted dozens of key products used by drugmakers, as investors piled into companies with little exposure to the US and China said it will boost generic drugs supply and quality.
The biggest blow by far would be to almost $4 billion worth of flat-panel TV screens, said Bloomberg Intelligence trade-policy analyst Caitlin Webber. Technology companies could see some cost increases or supply-chain disruption because there are multiple computer parts and components on this list, Webber said.
Tech companies like Apple Inc., Lenovo Group Ltd. or Hisense Electric Co. that operate significant Chinese production bases may also come out losers. Even American companies with manufacturing footprints there such as Dell Inc. and Intel Corp. may feel the pain if they export back home.
“The Trump administration deliberately targeted strategically important tech sectors,” said Teng Bingsheng, professor at the Cheung Kong Graduate School of Business in Beijing. “The US definitely feels threats from China over the next decade in areas including semiconductors.” Overall, though, the damage may be limited as Chinese tech exports to the US are small, he said.

Open Markets
Lenovo said in an emailed statement that as a global company it supports fair trade and open markets. Apple didn’t immediately respond to requests for comment, but CEO Tim Cook told a forum in Beijing last week he was opposed to an escalation in trade tensions. A representative for Hisense didn’t immediately respond to requests for comment.
Among industrial companies, CRRC Corp., the Chinese train maker that’s been expanding overseas, could feel the heat. The state-owned company has won orders to supply subway trains in Philadelphia, Los Angeles, Boston and Chicago.
It has also pledged to assemble or produce some of the parts in the US and create local jobs.
A slew of subsidiaries of Aviation Industry Corp. of China, known as AVIC, and the Commercial Aircraft Corp. of China, or COMAC, could also feel the pinch. That’s because they make parts for Boeing Co. planes in China. Though their annual contribution to China’s economy is not more than $1 billion, the manufacturing process helps them develop expertise in designing and building their own aircraft.
Representatives for CRRC and AVIC didn’t respond to calls requesting comments, while a spokesman for COMAC referred to the Chinese government’s reaction. Though the tariffs target Chinese drug makers, those on the losing side may be American pharmaceutical companies that make generics such as Mylan NV. The 25 percent tariff would be placed on raw ingredients for drugs such as insulin used by diabetics, the anti-allergic-reaction drug epinephrine, as well as vaccines, blood products and antidepressants, according to the list. For brand-name drugs, raw ingredients used by manufacturers are typically a tiny fraction of the cost of a product.
They can be more important for generic medications that are essentially low-cost commodity products.
China’s major suppliers of raw drug ingredients include Zhejiang Hisun Pharmaceutical Co., CSPC Pharmaceutical Group Ltd., and Zhejiang Hisoar Pharmaceutical Co. Still, shares of Chinese bulk drug makers jumped, after China’s cabinet released a series of favorable policies to boost the local generic drug industry.
Most of the nation’s drug companies are focussed on the domestic market and US sales account for a small percentage of their sales and profits, said Jialin Zhang, a senior health-care analyst with ICBC International Research Ltd. in Hong Kong.
CSPC Pharma shares gained as much as 9.8 percent, while Sinopharm Group jumped as much as 8.4 percent to a record close. Many consumer companies also shrugged off the tariffs. Qingdao Haier Co., a home appliance maker that acquired iconic American brand GE Appliances in 2016 for $5.6 billion, said the tariffs won’t hurt the company. A representative said more than half the company’s business comes from overseas.

China’s tit-for-tat tariffs send US index futures tumbling
Bloomberg

US stock futures extended declines in New York as jitters over trade tensions between the US and China further escalated. China said it would levy 25 percent tariffs on imports of 106 US products including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties on its high-tech goods.
Futures on the S&P 500 Index fell as much as 1.7 percent after Beijing said the charges will apply to around $50 billion of US imports, matching the scale of proposed US tariffs announced. Contracts on the Dow Jones Industrial Average slipped as much as 2 percent, while those on the Nasdaq 100 Index fell as much as 2.3 percent.
Asian and European equities were also lower amid an escalation of protectionist rhetoric between the world’s top two economies. Market turbulence in recent weeks has also been caused by a selloff in mega-cap technology stocks, as President Donald Trump has criticized
Amazon.com Inc. in a series of tweets and as Facebook Inc.’s user-data crisis continues.
The S&P 500 had finished back above its 200-day moving average on Tuesday after the White House said the government isn’t going after Amazon.

China batteries in US tariff plan for power tools, not EVs
Bloomberg

Chinese batteries in the crosshairs of proposed US tariffs are primarily used in consumer goods like power tools, and would have little impact on the type used by electric vehicles or power projects, according to UBS Group AG.
Among the Chinese-made goods US President Donald Trump is proposing to tax are lithium primary cells and batteries, as well as nickel-cadmium and lead-acid batteries, according to a report from the US Trade Representative office. Those types are mainly used in consumer applications, said UBS analyst Lachlan Shaw.
“Any impact on EV battery supply would be minimal to nil,” Shaw
said by phone. “It is lithium-ion rechargeable cells that are the ones that largely go into EVs.”
Almost all the electric passenger vehicles sold in the US use lithium-ion batteries that are produced
in the US or imported from South Korea, Japan and Canada, Ali
Izadi-Najafabadi, an analyst with Bloomberg New Energy Finance, said in an email.
The batteries targeted in the proposed tariffs are used in watches, hearing-aids and smoke-alarms,
he said.
The duties will probably affect companies such as Exide and Johnson Controls, which imports lead acid batteries from facilities in China, according to GTM Research energy analyst Ravi Manghani.