China Will Be Able To Withstand The Extreme Impact Of Trade Wars.

The Sino US trade war has officially started to impose tariffs on each other. The initial trade volume ($50 billion) initiated by the US side in the aggressive trade war has surpassed the highest record of bilateral trade disputes in the history of Global trade, and the US side's threat may also be multiplied and even increased to China's total export to the US.

China is the world's first export power for many years. Such a large-scale trade war will have a certain impact on Chinese export, import sector revenue and employment, and even a relatively big impact.

Can China withstand this shock, especially if it can withstand the extreme situation of China's all exports to the United States being subject to additional tariffs?

Our answer to these questions is yes.

This is not only because China has a huge domestic market, but also because we can maintain a considerable portion of the US market in the context of trade wars and strive to develop new overseas markets.

First of all, both at home and abroad need to realize this: today the United States no longer occupies the exclusive share of the world economy and trade system after the end of World War II and the end of the cold war.

According to the International Monetary Fund, the actual GDP in the US accounted for only 15.40% of the world's total in 2017.

According to the joint China World Trade Center conference data, in the total import trade volume of the world, the US imports accounted for the first peak after World War II, which was 15.06% in 1950. After many years of ups and downs, the US made a breakthrough in 1984 to 1986, breaking through 17% points, followed by 17.10%, 17.39% and 17.28%, and then went down again.

From 1999 to 2002, the United States accounted for the highest proportion of import trade in the world, breaking through the 18% mark, followed by 18.09%, 18.92%, 18.39% and 18.01%, and then fell again.

By 2013, the proportion of the United States had dropped to 12.30%, and last year (2017) was only 13.42%, equivalent to 70% of the peak period.

"The East is not bright, the west is bright, and the south is north," which is the portrayal of the global trading system that China is facing today.

Let us take a closer look at the impact of tariffs imposed by the two sides on their respective import and export sectors.

As a whole, the share of bulk goods imported from the United States in China is not very high, the highest 30% up and down, more than one percent twenty, and can be more substitutable, such as the highest percentage of American Soybean in the Chinese market is about 1/3, but China can be more convenient to obtain alternative sources from other countries, such as Russia, Argentina, Brazil and other countries.

Because China's implementation of peer retaliation has relatively little impact on the supply of related goods in the Chinese market, it has little impact on the related employment, which is mainly reflected in the impact of the US trade protection measures on China's export sector and its employment.

Over the years, the United States has been one of the top export markets in China.

According to Chinese customs statistics, last year, China exported 29103 billion yuan (US $429 billion 800 million) to the US trade in goods and imports 10430 billion yuan (US $153 billion 900 million).

In China's exports to the US, the major items and their exports last year (Statistics of China Customs Statistics) are as follows:

"Mechanical and electrical, audio-visual equipment and parts and accessories", US $198 billion 500 million;

"Vehicles, aircraft, ships and pport equipment", US $19 billion 700 million;

"Optical, medical and other instruments; watches and clocks; musical instruments", 10 billion 600 million US dollars;

"Base metal and its products", US $22 billion 500 million;

"Miscellaneous products", US $51 billion;

"Textile raw materials and textile products", US $42 billion 400 million;

"Shoes and caps and umbrellas; feather products; artificial flowers; human hair products"; $16 billion;

"Plastic and its products, rubber and its products", US $18 billion 500 million;

Products of the chemical industry and related industries, 13 billion 900 million US dollars.

In the list of 25% import tariff products recommended by the United States, China's commodities are distributed in machinery, aerospace, information and communication technology, robotics, medical products and other industries, and are mainly used by capital equipment, accessories and intermediate inputs for enterprises, with few final consumable products.

In the classification of foreign trade, it is mainly divided into the following items: "mechanical and electrical, audio-visual equipment and parts, accessories", "vehicles, aircraft, ships and pport equipment", "optical, medical and other instruments, watches and clocks, musical instruments", "base metals and their products", "chemical industry and related industrial products".

According to the competitiveness and market share of Chinese products in these fields, if the 25% tariff is added, the corresponding export enterprises in China will not make any adjustments. Some of the tariff products will be withdrawn from the US market, or at least temporarily withdrawn.

However, the export volume of US $50 billion was not high in China's total exports (US $22635 billion in 2017), accounting for only 2% in 2017, and there were as many as 1300 independent tariff items in China's export commodities, that is, the average export volume of each restricted export commodity was 38 million 460 thousand US dollars, and the trade volume allocated to each enterprise was smaller.

If the Sino US trade war is further escalated until the extreme situation of Trump's threat, that is, China's export to the US $429 billion 800 million (US $about 500000000000) is all subject to additional duties, the impact will be greatly expanded, but the impact on the income and employment of new export enterprises in China should not be as good as $50 billion.

Because in the mid-term elections this year, the US's first $50 billion list tries to avoid residents' daily consumption products, so as to minimize the impact on Residents' daily life.

If the tariff is added to the list of 84198150 tax rates, it is "stove, stove and microwave oven, except for microwave oven, which is used for making hot drinks or cooking or heating food, not for family purposes". But if the US increases the amount of trade involved in the amount of $two hundred billion, or even adds tariffs to all exports to China, it will not be possible to not include a large proportion of daily consumer goods, and these "made in China" commodities are very high in the US market. Even if tariffs are added, it is difficult to be replaced and quit the US market. The effect is likely to only raise the selling price of the US market.

Such as microwave oven, the export proportion of Guangdong Galanz company is very high, and half of the total export volume is sold to the US market.

The company is known for its "price killer" and relies on price competitiveness. The Levy of 25% tariffs seems to have a huge impact on its competitiveness in the US market.

But China's microwave oven production accounts for a high share of the world. Only one Galanz produces more than 60% of the world's microwave ovens. In addition to the electrical appliances of the United States, China accounts for over 90% of the global microwave oven production. Most of the vast majority of foreign brand microwave ovens are actually commissioned by Galanz and the United States.

Even if they impose a 25% tariff on their products, it is impossible for us importers to find new sources of supply.

Overall, the market share of China's bulk exports to the United States is very high, generally over 30%, and more than half, or even more than 70%, are not rare.

For example, furniture made in China accounts for 48% of the US market. Data show that only one furniture industry in Foshan, Guangdong province accounts for 1/10 of the world's total; China's mobile phone production accounts for more than 90% of the world's total; and China's textile and apparel products account for 36% of the world's market.

The huge market share of "made in China" means that even if the US impose tariffs, American importers will not find new sources of supply in the foreseeable future.

The above analysis implies the assumption that Chinese and American related enterprises will not make any adjustment arrangements, but in practice, Chinese enterprises will surely coordinate with the US importers to carry out adjustment so as to weaken the impact of the imposed tariffs.

In the short term, the two sides will intensify the signing of the shipping contract in the period of publicized tariff list. In the long run, they will adjust their production arrangements in order to improve efficiency, digest the effect of 25% additional tariffs, and avoid as much as possible the strike of additional tariffs.

Because the rules of origin of the United States of America follow the local standards, if the value of us parts, accessories and services reaches a certain proportion (such as 50%), even if the final production and assembly is completed in China, it can also be deemed "made in the United States" and enjoy preferential or even tax-free access to the United States.

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In practice, some American enterprises should have begun to take the Sino US trade war as an opportunity to layout the relevant rules of origin.

At the same time, we should not underestimate the space for China's related industries to increase efficiency and absorb tariffs.

In fact, in recent years, Chinese manufacturing enterprises have invested huge amounts of equipment to replace human equipment due to the rising trend of labor costs. Many of them are globally leading. For example, Galanz has built the world's first automatic microwave oven production line and has been running for more than two years.

The vitality of this adjustment will also be used to deal with trade wars.

Moreover, the first tariff list of $50 billion involves a lot of products. Because of the monopoly of western enterprises, the profit margin is very high. This means that if Chinese enterprises can increase efficiency, even if they impose 25% tariffs, they will be able to do so in the United States.

Win price competitiveness.