Market Dynamics: Trump'S Tariff Parity Basically Cuts Off American Cotton Imports

Trump's "equivalent tariff" exceeded market expectations by 104%, triggering sharp fluctuations in global asset prices. China has introduced counter-measures against the United States. At present, China's cumulative tariff increase on American cotton has reached 49%, basically cutting off American cotton imports.

However, the market has a certain expectation that China will no longer purchase American cotton in the future. The current focus is on how other overseas American cotton consuming countries should deal with Trump's comprehensive tariff.

The impact of China's counter-measures on domestic cotton supply is limited. However, after the "tariff parity", the cumulative additional tariff imposed by the United States on China's cotton products has reached 104%. In addition, the United States particularly emphasizes the abolition of the small package tax exemption policy below $800, which will have a significant impact on China's textile and clothing exports.

In addition, the United States also imposed tariffs on Southeast Asia and other countries, blocking China's entrepot trade, and if these countries gradually compromise, it may lead to the outflow of domestic orders.

In terms of fundamentals, internationally, the global cotton market's supply and demand easing pattern in 24/25 was maintained. Although the USDA Outlook Forum's estimate of global cotton supply and demand in 25/26 was more favorable, the short-term easing situation is difficult to change. With the intensification of the global trade war, the demand side is expected to be further constrained.

At the end of March, the intended planting area was announced, and the expected seed shrinking of American cotton in the new year was enhanced. The focus of American cotton gradually shifted to the supply in the new season. It is necessary to continue to pay attention to the drought in the main producing areas of American cotton and its impact on the planting intention of new cotton. However, at present, the macro risks caused by the US imposition of tariffs on the world have not ended, and the drag of short-term tariffs on US cotton demand is still the focus of market transactions.

Domestically, the current inventory of cotton industry and commerce is still high, the domestic cotton planting area is expected to increase steadily in the new year, and the planting end is currently lack of obvious positive drive. On the demand side, the performance of the downstream in March has improved on a month on month basis, but the level is still weak compared with the same period in the peak season. At present, there is no obvious negative feedback on the downstream inventory, and short-term consumption still has some support. However, demand is expected to weaken after April, and the trade war continues to escalate. Enterprises' risk aversion is increasing. If the tariff lasts for a long time, the future demand situation may not be optimistic.

Short term shock and empty thinking. The trade war continues to escalate, the macro risks caused by tariffs have not ended, and the volatility of cotton prices has increased. Although the absolute valuation is currently low, it is not recommended to try to copy the bottom temporarily.