What Is The Impact Of Sino US Economic And Trade Agreements Signing Tariffs To 7.5% On The Textile Industry Chain?

Washington on the morning of January 15th local time, the signing ceremony of the first phase of Sino US economic and trade agreement was held in the East Chamber of the White House. Liu He, member of the Political Bureau of the CPC Central Committee, vice premier of the State Council and Chinese leader of the Sino US comprehensive economic dialogue, signed the text of the agreement with President Trump.

The agreement includes nine chapters, including preamble, intellectual property rights, technology transfer, food and agricultural products, financial services, exchange rate and transparency, expanding trade, bilateral assessment and dispute settlement, and final provisions. At the same time, the two sides agreed that the US side will fulfill relevant commitments to phasing out tariffs on Chinese products at a phased stage, so as to achieve a shift from increased tariffs to lower tariffs.

This time, China and the United States successfully signed the first stage economic and trade agreement. The textile market is still most concerned about tariff issues. The agreement pushed the US side to impose a tariff increase from China to China, including a moratorium on the tariffs to be added in December 15th last year and a tariff rate of 15% to 7.5% which came into effect in September 1st last year.

The tariff rate accords with the expectation of the first stage negotiations, and also provides the initiative for the next negotiation. How does this affect the entire textile industry chain?

For polyester raw materials In 2019, the polyester raw material market continued to decline. In the first half of the year, PTA also made a profit of 1000 yuan, but it reached a deficit in the second half of the year. As of January 15th, the profit of PTA was only 2 yuan / ton, which was nearly 900% lower than that of 2019's peak value of 1787 yuan / ton. While glycol has improved in the second half of the year, it relies more on low inventory, rather than high demand.

On the 15 day, after the agreement reached between China and the United States, the polyester raw material market remained calm and there was no big fluctuation. It was evident that although the macroeconomic benefits had been driven, it was now in the period of the Spring Festival holiday. The market lacked vitality and weakened demand, and there was no obvious fluctuation in raw materials. But after the start of the year, once the market is better, the substantial benefit of Sino US trade will become one of the important reasons for the future rally.

For polyester filament, In 2019, because of the shrinking demand for weaving Market, raw material polyester was basically purchased on demand, and the regular operation of raw materials storage at the end of the year was smaller than that in previous years, resulting in the decline of polyester filament prices in 2019, and polyester manufacturers gradually lost the right to speak, and it was difficult to raise prices. Now that Sino US trade is improving, it will enhance the confidence of polyester manufacturers and consolidate the reasons for the price increase.

In recent days, the price of polyester has basically remained stable. We can see that there is a lag in the macro good. It is not absolute. The price trend of polyester is not only driven by the macro, but also needs.

For weaving manufacturers, The repeated Sino US trade has more or less brought bad profits to the weaving factories, which has made it more difficult for manufacturers to make orders. Now, China and the United States have signed the first stage economic and trade agreement, which has reduced tariffs. So the backlog of two years' list will be concentrated or burst after the beginning of the year.

However, the tariff adjustment only reduced taxes on textiles in US $120 billion, and another $175 billion in tariffs on export commodities to the US remained unresolved. Textile exports remained variable, and the trend of the next stage of economic and trade agreements remained to be observed later.

Concluding remarks

In the past two years, the market has been suffering from the unease of Sino US trade. Now, China and the United States have signed the first stage economic and trade agreement, which is a huge profit and has injected a stable factor for China and the United States and the world economy. It is not only conducive to the economic development of China and the United States, but also to the world economy. As for the textile market, the positive signals of Sino US trade release will surely inject a "strong heart" into the polyester market, consolidate the trend of raw materials, and assist the foreign trade market even more after the beginning of the year.