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U.S.-China trade war reroutes U.S. import flows
Reuters | 2019/4/12

LOS ANGELES -- President Donald Trump's trade war with China has U.S. companies shifting purchases of tariff-targeted products such as car tires and refrigerators to countries such as Vietnam, South Korea, Taiwan and Mexico, according to an analysis released Wednesday.

Trump's decision to slap tariffs of 10 to 25 percent on about $250 billion of Chinese goods has roiled U.S. retailers and manufacturers, who are scrambling to avoid potentially crippling cost increases.

Overall U.S. imports of containerized freight from China fell 6.4 percent during the first quarter as buyers worked off product stockpiled ahead of tariff increases and rerouted orders to lower-cost countries, S&P Global Market Intelligence's trade data firm Panjiva said in the report.

The auto industry has moved quickly to rethink trade routes.

Tire imports from China slumped 28.6 percent during the first three months of the year. At the same time, U.S. sea ports saw a 141.7 surge in product from Vietnam and an 11.1 percent increase in tire shipments from South Korea. Hankook Tire and Nexen are among the suppliers picking up the new business, Panjiva said.

U.S. companies are also shifting factory investments in the wake of the China trade tiff, which a trio of economists estimate has already cost U.S. consumers and companies $19.2 billion.

Ohio-based Cooper Tire & Rubber Co. in December said it formed a joint venture with Sailun Vietnam Co. to build a truck and bus radial tire factory near Vietnam's Ho Chi Minh City.

"We are excited about this addition to our manufacturing footprint, which diversifies our sourcing to protect against risk, including tariffs," Cooper CFO Christopher Eperjesy said in February, when the company announced a $34 million write-down on the value of a joint venture manufacturing project in China. 

Other industries
U.S. imports of Chinese-made furniture by retailers such as IKEA, Home Depot, Target Corp. and Room to Go fell 13.5 percent in the first quarter. That was partly offset by a 37.2 percent rise in shipments from Vietnam and a 19.3 percent increase in imports from Taiwan, Panjiva said.

The change also affected home appliances.

Imports of Chinese refrigerators fell 24.1 percent during the quarter, when shipments from South Korea and Mexico jumped 31.8 percent and 32 percent, respectively.

"A major factor in that shift has been a rearrangement in supply chains by Samsung Electronics and LG Electronics," Panjiva said in the report.

The report comes as the U.S. and China moved closer to a new trade deal.

The U.S. and China have largely agreed on a mechanism to police any trade agreement they reach, including establishing new "enforcement offices," U.S. Treasury Secretary Steven Mnuchin said on Wednesday.

Mnuchin, speaking on CNBC television, said that progress continues to be made in the talks, including a "productive" call with China's Vice Premier Liu He on Tuesday night. The discussions would be resumed early on Thursday, Washington time, he added.

Mnuchin declined to comment on when or if U.S. tariffs on $250 billion worth of Chinese goods would be removed. Although Trump said recently that a deal could be ready around the end of April, Mnuchin declined to put a timeframe on the negotiations, adding that Trump was focused on getting the "right deal."

"As soon as we're ready and we have this done, he's ready and willing to meet with President Xi (Jinping) and it's important for the two leaders to meet and we're hopeful we can do this quickly, but we're not going to set an arbitrary deadline," Mnuchin added.

The U.S. is demanding that China implement significant reforms to curb the theft of U.S. intellectual property and end forced transfers of technology from American companies to Chinese firms.

Washington also wants Beijing to curb industrial subsidies, open its markets more widely to U.S. firms and vastly increase purchases of American agricultural, energy and manufactured goods.

The Chinese commerce ministry on Thursday confirmed that senior trade negotiators from both countries discussed the remaining issues in a phone call following the last round of talks in Washington.

"In the next step, both trade teams will keep in close communication, and work at full speed via all sorts of effective channels to proceed with negotiations," Gao Feng, the ministry's spokesman told reporters in a regular briefing in Beijing.

Mnuchin did not address whether the enforcement structure would allow the United States a unilateral right to reimpose tariffs without retaliation if China fails to follow through on its commitments.

People familiar with the discussions have said that U.S. negotiators are seeking that right, but that China is reluctant to agree to such a concession. Alternatively, the United States may seek to keep tariffs in place, only removing them when China meets certain benchmarks in implementing its reforms.

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