The latest situation of Sino-US trade wars Will Trump impose an increase of 25% on China?
According to foreign media reports, on May 5, local time, US President Donald Trump said that the tariff of Chinese goods worth 200 billion US dollars will be increased to 25% from May 10. The tariff rate for these goods was originally set at 10%, and Trump initially threatened to raise tariffs at the beginning of this year, but postponed the decision after China and the United States agreed to sit down for trade negotiations.
In addition, Trump also threatened to "impose" a 25% import tariff on another US$325 billion Chinese commodity. Trump said that trade talks with China are still going on, but the Chinese side is trying to renegotiate and the progress is slow.
According to the Office of the US Trade Representative, the total amount of US imports from China in 2018 was $539.5 billion, and the trade deficit was $419.2 billion. If Trump insists on fulfilling its threats, almost all goods imported from China to the United States will face some degree of tariffs.
On May 3, US Vice President Mike Pence also said that President Trump still has hopes for a trade agreement with China. On May 1, the White House said that the latest round of negotiations between China and the United States has taken another step towards reaching an agreement. White House press spokeswoman Sarah Sanders said, "The negotiations are aimed at making substantial progress on important structural issues and rebalancing Sino-US trade relations."
In addition, there have been many reports that China and the United States will soon reach a trade agreement (as early as May 10). However, Trump’s latest move shows that trade tensions between the world’s two largest economies have escalated and Trump’s attitude has changed significantly.
What impact does the upgrade of the trade war have on the connector industry? Let us review the impact of the previous trade war and then judge.
At midnight on September 24, 2018, the third round of tariff increase policy came into effect. This round includes products used in the electronics industry, such as copper, nickel, steel and other metals; some tools; some wire products; some electrical appliances; mechanical and automotive components; some batteries, insulators, light-emitting diodes and printed circuit components; Television and broadcasting equipment; a range of materials used for soldering electronic components; and chemicals for lead, metals and plastics. These tariffs are currently 10%, but if the United States and China fail to reach a successful agreement by the end of the year, they will increase to 25% on January 1, 2019. (For more information, please refer to the full list of tariffs.) Negotiations between the United States and China are imminent.
At the same time, the Chinese Ministry of Commerce accused the United States of creating “economic risks” and announced its own retaliatory measures to impose a 5% to 10% tariff on US$60 billion worth of US products. More than 5,000 US products will be affected, including food and beverage products, chemicals, clothing, machinery and auto parts.
This marks a new stage of long-term trade war with China. For some companies, this is a painful trade war. Both countries are currently in an economic deadlock and are not expected to make concessions before the US midterm elections. White House Deputy Press Secretary Lindsay Walters said: "We are open to discussions with China, but China must engage in meaningful discussions on unfair trade practices."
China stated that it is also open to negotiations. “The door to trade negotiations is always open, but negotiations must be carried out in a mutually respectful environment,” the Xinhua News Agency published a white paper stating that negotiations “cannot be carried out under the threat of tariffs”. However, in China, some theories are circulating. These theories show that the tariff situation is not just a trade rebalancing, but a larger strategy for the United States to contain China's global dominance. Despite the slowdown in economic growth in recent years, China is expected to overtake the United States in 2030 and become the world's largest economy. At the time of the introduction of tariffs, the relationship between the two countries fell into a greater predicament, including the exclusion of China from the Pacific Rim military exercises, the US concern for Taiwan and other events.
Economists are concerned about the global impact of these actions. Fitch Ratings cut its 2019 global growth forecast by 0.1% to 3.1% and warned that it will face more risks. Retailers such as Target, Home Depot and Walmart say tariffs will force them to raise consumer prices. (Some companies, including Apple and Fitbit, have managed to exclude companies from the tariff list.)
Bishop&Associates pays special attention to the impact of trade warfare on electronic components. We also recognize that the ultimate goal of US trade action is to protect the US electronics industry and its important intellectual property that contributes to global technology. The United States accuses China of unfair trade practices, including dumping, industrial subsidies, intellectual property theft and forced technology transfer. At the same time, it is hoped that through trade wars, trade imbalances can be reduced and intellectual property rights in the United States can be protected.
Trade war signs
On September 24th, the Trump administration announced that it had successfully reached its first major trade agreement. The United States has revised its South Korean agreement to allow the sale of 50,000 US cars that meet US emissions standards (rather than Korean standards) in South Korea, thereby reducing the trade deficit between the United States and South Korea. South Korea will also cut 30% of its exports to the United States. Both of these developments have had a positive impact on connectors and electronics companies. If the Korean Parliament agrees to the agreement, the agreement will take effect on January 1, 2019. It also depends on whether the United States exempts Korean cars from tariffs. In exchange, the United States will provide support to South Korea in peace talks with North Korea.
The United States has also reached an interim agreement with Canada and Mexico to maintain trade in its two largest export markets. The revised agreement will give the United States more opportunities to enter the Canadian dairy market, limit Canada’s exports to the United States, and have undisclosed effects on manufacturing, online shopping and intellectual property.
Europe is conducting "exploratory negotiations" with the United States on a restrictive trade agreement; we expect these negotiations to begin in November. We believe that these actions have shown positive signs of success in negotiations with China.
The IPC-Connected Electronics Industry Association issued a statement supporting the continued strong measures.
“IPC supports the United States in its active efforts to address the discriminatory treatment of its trading partners with US companies. We hold the same position in every country where we have member companies. Only those countries that voluntarily join the agreement fulfill their obligations, The trade agreement is meaningful," said IPC President and CEO John Mitchell.
We also recognize that some of these trade actions have put direct pressure on the connector industry. In the process, many companies face pressure and uncertainty. We are listening to companies like TLC Electronics, which says it will charge customers for additional costs due to tariffs as a separate temporary project rather than a full price increase. We see that companies like ECCO connectors are working closely with customers to propose alternative procurement options when possible and to communicate tariff costs when they are unavoidable. We also recognize that small companies like Blue Jeans Cable face different situations. They say that most types of connectors they work on pay tariffs, but do not include cable assemblies that have connectors installed.
“This means that Chinese cable assembly companies can buy these connectors at low cost without having to pay punitive tariffs, then they can make cable assemblies and export them to the US, but they still don’t have to pay these tariffs. If we use the same cable and Connectors to build the same cable assembly, we pay customs duties; because we separately purchased connectors and cables. Chinese manufacturers use it as part of the assembly, without being bound by tariffs. The result is Chinese cable The assembly company has a systematic competitive advantage over the domestic cable assembly companies (such as Blue Jeans Cable). In fact, if we are willing, we can open a cable assembly factory in China, and pay lower wages, and no extra Paying the imposed tariffs to buy connectors. At the same time, we will not do this for the dismissal of American workers for the benefit of Chinese workers. But we will not do it, others will probably do so."
These are challenging scenarios, and every company in the industry is making the tough decisions it needs to make in order to ultimately reap the rewards of a fairer future trade relationship. We are guaranteed from organizations such as the ECIA, which is working closely with its members to understand and minimize the impact of this situation, and is still optimistic that a fair solution can be achieved.
Therefore, if the connector is sold separately instead of the wiring harness, then a new round of trade war will not have much impact on the connector manufacturer.
From an industry perspective, all high-tech products exported to the United States will increase their tariffs by 25%. Therefore, for buyers, they have to obtain greater profits, and it is bound to start with suppliers. Or the price of products and taxes exported to the United States makes the price of products much higher than before and sales decline.
According to the Office of the US Trade Representative, the total amount of US imports from China in 2018 was $539.5 billion, and the trade deficit was $419.2 billion. If Trump insists on fulfilling its threats, almost all goods imported from China to the United States will face some degree of tariffs.
On May 3, US Vice President Mike Pence also said that President Trump still has hopes for a trade agreement with China. On May 1, the White House said that the latest round of negotiations between China and the United States has taken another step towards reaching an agreement. White House press spokeswoman Sarah Sanders said, "The negotiations are aimed at making substantial progress on important structural issues and rebalancing Sino-US trade relations."
In addition, there have been many reports that China and the United States will soon reach a trade agreement (as early as May 10). However, Trump’s latest move shows that trade tensions between the world’s two largest economies have escalated and Trump’s attitude has changed significantly.
What impact does the upgrade of the trade war have on the connector industry? Let us review the impact of the previous trade war and then judge.
At midnight on September 24, 2018, the third round of tariff increase policy came into effect. This round includes products used in the electronics industry, such as copper, nickel, steel and other metals; some tools; some wire products; some electrical appliances; mechanical and automotive components; some batteries, insulators, light-emitting diodes and printed circuit components; Television and broadcasting equipment; a range of materials used for soldering electronic components; and chemicals for lead, metals and plastics. These tariffs are currently 10%, but if the United States and China fail to reach a successful agreement by the end of the year, they will increase to 25% on January 1, 2019. (For more information, please refer to the full list of tariffs.) Negotiations between the United States and China are imminent.
At the same time, the Chinese Ministry of Commerce accused the United States of creating “economic risks” and announced its own retaliatory measures to impose a 5% to 10% tariff on US$60 billion worth of US products. More than 5,000 US products will be affected, including food and beverage products, chemicals, clothing, machinery and auto parts.
This marks a new stage of long-term trade war with China. For some companies, this is a painful trade war. Both countries are currently in an economic deadlock and are not expected to make concessions before the US midterm elections. White House Deputy Press Secretary Lindsay Walters said: "We are open to discussions with China, but China must engage in meaningful discussions on unfair trade practices."
China stated that it is also open to negotiations. “The door to trade negotiations is always open, but negotiations must be carried out in a mutually respectful environment,” the Xinhua News Agency published a white paper stating that negotiations “cannot be carried out under the threat of tariffs”. However, in China, some theories are circulating. These theories show that the tariff situation is not just a trade rebalancing, but a larger strategy for the United States to contain China's global dominance. Despite the slowdown in economic growth in recent years, China is expected to overtake the United States in 2030 and become the world's largest economy. At the time of the introduction of tariffs, the relationship between the two countries fell into a greater predicament, including the exclusion of China from the Pacific Rim military exercises, the US concern for Taiwan and other events.
Economists are concerned about the global impact of these actions. Fitch Ratings cut its 2019 global growth forecast by 0.1% to 3.1% and warned that it will face more risks. Retailers such as Target, Home Depot and Walmart say tariffs will force them to raise consumer prices. (Some companies, including Apple and Fitbit, have managed to exclude companies from the tariff list.)
Bishop&Associates pays special attention to the impact of trade warfare on electronic components. We also recognize that the ultimate goal of US trade action is to protect the US electronics industry and its important intellectual property that contributes to global technology. The United States accuses China of unfair trade practices, including dumping, industrial subsidies, intellectual property theft and forced technology transfer. At the same time, it is hoped that through trade wars, trade imbalances can be reduced and intellectual property rights in the United States can be protected.
Trade war signs
On September 24th, the Trump administration announced that it had successfully reached its first major trade agreement. The United States has revised its South Korean agreement to allow the sale of 50,000 US cars that meet US emissions standards (rather than Korean standards) in South Korea, thereby reducing the trade deficit between the United States and South Korea. South Korea will also cut 30% of its exports to the United States. Both of these developments have had a positive impact on connectors and electronics companies. If the Korean Parliament agrees to the agreement, the agreement will take effect on January 1, 2019. It also depends on whether the United States exempts Korean cars from tariffs. In exchange, the United States will provide support to South Korea in peace talks with North Korea.
The United States has also reached an interim agreement with Canada and Mexico to maintain trade in its two largest export markets. The revised agreement will give the United States more opportunities to enter the Canadian dairy market, limit Canada’s exports to the United States, and have undisclosed effects on manufacturing, online shopping and intellectual property.
Europe is conducting "exploratory negotiations" with the United States on a restrictive trade agreement; we expect these negotiations to begin in November. We believe that these actions have shown positive signs of success in negotiations with China.
The IPC-Connected Electronics Industry Association issued a statement supporting the continued strong measures.
“IPC supports the United States in its active efforts to address the discriminatory treatment of its trading partners with US companies. We hold the same position in every country where we have member companies. Only those countries that voluntarily join the agreement fulfill their obligations, The trade agreement is meaningful," said IPC President and CEO John Mitchell.
We also recognize that some of these trade actions have put direct pressure on the connector industry. In the process, many companies face pressure and uncertainty. We are listening to companies like TLC Electronics, which says it will charge customers for additional costs due to tariffs as a separate temporary project rather than a full price increase. We see that companies like ECCO connectors are working closely with customers to propose alternative procurement options when possible and to communicate tariff costs when they are unavoidable. We also recognize that small companies like Blue Jeans Cable face different situations. They say that most types of connectors they work on pay tariffs, but do not include cable assemblies that have connectors installed.
“This means that Chinese cable assembly companies can buy these connectors at low cost without having to pay punitive tariffs, then they can make cable assemblies and export them to the US, but they still don’t have to pay these tariffs. If we use the same cable and Connectors to build the same cable assembly, we pay customs duties; because we separately purchased connectors and cables. Chinese manufacturers use it as part of the assembly, without being bound by tariffs. The result is Chinese cable The assembly company has a systematic competitive advantage over the domestic cable assembly companies (such as Blue Jeans Cable). In fact, if we are willing, we can open a cable assembly factory in China, and pay lower wages, and no extra Paying the imposed tariffs to buy connectors. At the same time, we will not do this for the dismissal of American workers for the benefit of Chinese workers. But we will not do it, others will probably do so."
These are challenging scenarios, and every company in the industry is making the tough decisions it needs to make in order to ultimately reap the rewards of a fairer future trade relationship. We are guaranteed from organizations such as the ECIA, which is working closely with its members to understand and minimize the impact of this situation, and is still optimistic that a fair solution can be achieved.
Therefore, if the connector is sold separately instead of the wiring harness, then a new round of trade war will not have much impact on the connector manufacturer.
From an industry perspective, all high-tech products exported to the United States will increase their tariffs by 25%. Therefore, for buyers, they have to obtain greater profits, and it is bound to start with suppliers. Or the price of products and taxes exported to the United States makes the price of products much higher than before and sales decline.
The impact of the trade war on the connector industry is mainly in the wiring harness, so for Konnra Electronics, a new round of trade war will have a lasting impact on us.
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