How Trump-China trade spat is rippling through corporate America

The clothing and footwear industry was largely spared by Trump administration tariffs on Chinese goods, but a looming trade war could still do damage to an apparel sector that's more global than ever.
The clothing and footwear industry was largely spared by Trump administration tariffs on Chinese goods, but a looming trade war could still do damage to an apparel sector that's more global than ever.PHOTO: AFP

LOS ANGELES (BLOOMBERG) - Washington's action against Chinese imports Friday (June 15), and the response from Beijing, are hurting some US industries more than others. Here's a round-up of Bloomberg's coverage of how the dispute is playing out in corporate America.

Apparel

The clothing and footwear industry was largely spared by Trump administration tariffs on Chinese goods, but a looming trade war could still do damage to an apparel sector that's more global than ever.

The actual shirts and shoes imported from China won't get new tariffs, according to the full list of 1,102 product lines released Friday. Only some of the equipment used to make them, like textile rolling-machine parts and injection molders for shoes, were included in the final list.

A host of other Chinese machinery used by American apparel companies that had been on a preliminary tariff list - like textile printing equipment, sewing machines and looms - made it through unscathed.

Autos

The US imported only 58,437 passenger vehicles from China last year, a sliver of the 8.27 million shipped to America from the rest of the world, according to the Commerce Department's International Trade Administration.

General Motors Co.'s Buick Envision sport utility vehicle, which starts at US$31,995, is among the handful of autos imported into the US from China. With the Trump administration planning to impose 25 per cent duties on products including motor vehicles, each of the SUVs could be subject to levies of about US$8,000.

Other cars potentially subject to US tariff include Volvo S60 sedans, which the Chinese-owned Swedish automaker started importing to the US in 2015.

While US automakers import few vehicles into China, the tariffs pose a significant threat to BMW AG and Daimler AG's US factories that make vehicles both for domestic buyers and export markets.

BMW builds X3 through X6 sport utility vehicles in Spartanburg, South Carolina, its largest assembly plant in the world, while Daimler produces Mercedes-Benz C-Class sedans and GLS and GLE crossovers near Tuscaloosa, Alabama.

Tesla Inc. also builds all of its vehicles in Fremont, California, and the tariffs could compromise the affordability of Model S sedans and Model X SUVs in its second-biggest market in the world. Revenue from deliveries to China surged 90 per cent last year to US$2.03 billion.

Aerospace

US aerospace exports to China totalled US$16.3 billion last year, while imports came to only US$956 million in parts, according to Teal Group analysis of International Trade Commission data.

That favourable balance could shrink if China expands its levies on the 737 jetliner, the biggest source of profit for Boeing Co., which is the largest US exporter. Boeing shares slid as much as 2.5 per cent Friday on the trade war concerns, but they recovered some ground later in the trading day. A list of tariffs published by the Chinese government Friday appeared not to target aircraft.

Boeing said in an emailed statement that it's assessing the impacts of the US tariffs and "any reciprocal action" from China. "We will continue to engage with leaders in both countries to urge a productive dialogue to resolve trade differences," the company said.

Chemicals

The Chinese tariffs target US$2.2 billion in annual imports of plastics, lubricating oils, and other chemicals, according to the American Chemistry Council, an industry advocate.

"The administration has now pit US chemical manufacturing directly against China at the front lines of this conflict," the chemistry council said in a statement Friday.

 

The Chinese are targeting chemicals because shale fracking has unleashed a torrent of low-cost gas-based feedstocks that make the US the world's low cost producer. Chemicals are now one of the top US exports, accounting for 14 per cent of the nation's total, the ACC said.

The tariffs will disrupt supply chains and shift production outside the US, jeopardising as much as US$100 billion in planned chemical factory investments, the ACC said. As many as 24,000 jobs could be lost due to lower chemical demand from China, the council said. Big US plastics makers including DowDuPont Inc. have said they'll supply China from plants outside the US to avoid the tariffs.

"Enabling a retaliatory trade war will only advantage China's growing industry at the expense of American production," the ACC said in the statement.

Renewables

President Donald Trump's tariffs on US$50 billion in Chinese imports include duties on components for wind turbines, nuclear reactors and batteries - but they are unlikely to cripple any of those industries.

Less than 2 per cent of wind turbines installed in the US since 2010 were imported from China, Stephen Munro, an analyst at Bloomberg New Energy Finance, said in an email Friday.

"It may prove to be a glancing blow as there are non-Chinese alternatives available," he said.

The list of targeted products includes components used in most lithium-ion batteries, Ravi Manghani, an analyst at GTM Research, said in an email. But China supplies the US with just 3 per cent of those products, he said. Plus, he added, American manufacturers have multiple alternatives from Japan and South Korea.

When it comes to nukes, there are only two reactors under construction in the US, and it's unlikely ground will be broken on any more large ones in the next decade, Chris Gadomski, a Bloomberg New Energy Finance analyst, said in an email.

"Any new reactors that may be built would be US developed advanced reactors absent Chinese components," Gadomski said in an email.

Agriculture

Soybean futures fell to the lowest in 10 months in anticipation of retaliation from China. Prices for November delivery dropped 0.7 per cent to US$9.4375 a bushel on the Chicago Board of Trade after touching US$9.2725, the lowest for the most active contract since August 17, 2017. This week, the oilseed tumbled 5.8 per cent, poised for a record decline.

 

Duties against US shipments may mean that China imports more from South America at a premium, Rabobank said in a report. Prices in Brazil, the world's top exporter, are rising after a national trucker strike stalled freight and a drought in Argentina cut global global supplies.

Cotton for December delivery tumbled as much as 3.7 per cent to 89.52 cents per pound on ICE Futures US in New York.

"Fears that US cotton may be involved in the China retaliatory response helped to drive the market sharply lower," David Hightower, founder of Chicago-based Hightower Report, said in a note.

Metals/Mining

Metals & mining was the worst-performing sector on the S&P 500 Index.

While iconic US metal stocks Alcoa Corp. and US Steel Corp. had previously benefited from the Trump administration's initial crackdown on cheap imports, the shares were trading down Friday.

It's part of a mining and metal selloff fueled by concern that Trump's announcement will end up curtailing demand in the world's biggest consumer of raw materials. Shares in Alcoa fell as much as 5.7 per cent Friday, while US Steel lost 6.3 per cent.

A fall in other metals, from aluminum to zinc, spurred declines for Teck Resources Ltd., Freeport-McMoRan Inc. and other miners. China is the biggest consumer of industrial metals.

The tariffs mean China "won't be importing as much of the base metals," said Peter Thomas, a senior vice president at Chicago-based metals broker Zaner Group. "As these tariffs take effect, we'll see less consumption from each side until it gets settled. It started with base metals and it's pulling on gold."