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Global Stock Markets Impacted by Trade War

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Global Stock Markets Impacted by Trade War

Understanding the finer points of the stock market and the how and why of its ups and downs is a complex task for anyone. When major shifts in a whole diaspora of fields occur, people often look to the stock market as a gauge for how significant those shifts really are and what the potential results are going to come out as. World news is often reported as to how it has an impact on the world of finance, and this is certainly one such instance, as President Trump trades tariff blows with China in a rapidly escalating trade war. The impact of this trade war certainly didn’t avoid the stock market, which took notice of the shifting costs of exports and imports and created a noticeable response. Let’s take a look at what’s really going on in this recent episode in the global economy.

Trump VS China

The US President’s attitude towards foreign nations is an eternally shifting spectrum, though it does tend to rest somewhere towards antagonistic for the sake of sending a message. Trump’s ‘show of force’ tactics recently got him into a situation with China on a trade front, causing a situation that has impacted all of the global markets, and heavily impacted the American and Chinese markets. “Trump has a latent tension towards China that simply won’t abate, no matter how few tangible issues there are in reality. This drove him most recently to impose some pretty severe tariffs on Chinese goods,” reports Samuel Chang, data analyst at WriteMyx and BritStudent.

US Tariff

The United States began a 15 percent tariff on hundreds of billions of dollars of Chinese goods for import, from tech to clothing. Trump’s explanation for his move relates again to his suspicion of all of the largest global powers, from Russia to China. He spoke out, via his favorite medium Twitter, about the US over-reliance on Chinese exports, and that his tariff was a motivator for US companies to look for alternative solutions for suppliers outside of China, rather than simply turning to some nation over and over again to supply the products they needed.

Trump’s Reasoning

Trump’s steps to disincentivize US trade with China could be viewed as impulsive, since the immediate effects of so drastic a tariff will likely fall on the US consumer, with US household costs potentially rising by up to $1000 a year, with such a large selection of consumer goods now made noticeably more expensive. Similarly, Trump’s plan, though it must have considered the possibility of consequences, didn’t allow for a reaction in the opposite direction as the Chinese trade officials lashed back at the tariff.

The Chinese Response

Not ones to be out-maneuvered, least of all by Trump, the Chinese responded to the tariffs with sanctions of their own that were as much a political response as a practical one, as they delivered a counter punch to Trump’s initial move. China immediately imposed additional tariffs on exported goods on a $75-billion target list, and further tariffs were placed on thousands of items originating from the US. Similarly, China was quick to begin imposing new duties on US crude oil, a predictable but damaging move that has made the potential fallout and impact on global stock markets more noticeable.

The Trade War Fallout

“Such actions from nations as influential as the US and China don’t come without an impact that affects people from all around the world. In this instance, a variety of shifts have left most markets a little worse for wear, but most drastic damage has been avoided”, explains Mark Cherry, a business writer at Australia2Write and NextCoursework. The fallout included the US stock futures dipping 0.7% and the Asian markets are down. A noticeable drop in oil prices was also recorded, as would have been expected after the duties imposed on US crude by the Chinese.

Conclusion

This is the latest in a series of jabs between the US and China, though there is no sense in which these sorts of interactions have all that much of a practical purpose. Though this particular episode abated pretty swiftly, the threat of further escalations has made the market quite jittery.

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Mildred Delgado is a young and responsible marketing strategist at PhdKingdom and AcademicBrits. She works with a company’s marketing team in order to create a fully-functional site that accurately portrays the company. Mildred is also responsible for presenting these details to stakeholders in a series of marketing proposals. You can find her work at OriginWritings.

expert logistics

8 Strategies to Navigate Trade and Tariff Volatility

A steady drumbeat of tariffs, changing trade policy and an overall environment of uncertainty are leading many manufacturers to take a “wait and see” approach to investment and expansion. Companies are reassessing spending plans, finding it challenging to adjust how they do business on the fly in response to unsettled trade policies.

Manufacturers have seen the effects in the cost of raw materials, which has led customers with long-term pricing agreements to push back. Some are finding they need to negotiate changes to contract terms, while others are faced with locating new supply sources. However, these are difficult changes to make, and companies are unsure whether to push forward as uncertainty over tariff amounts, origin, timing and related retaliation persists.

As a result, manufacturers are hesitant to commit to large investments or expansion plans unless they can be certain they’ll see a long-term payoff. Whether manufacturers need to change their supply chain strategy, find alternative sourcing or re-source materials, they don’t feel confident implementing these initiatives without more evidence of stability in trade policy.

While the next round of tariffs may be out of manufacturers’ control, they can be proactive in preparing for changing trade policies by considering these steps to weather the storm:

Renegotiate rates with suppliers
Even if a manufacturer’s products aren’t direct tariff targets, they may include affected materials like steel and aluminum, resulting in higher cost of goods and materials. Now is the time to renegotiate terms with suppliers and try to lock them into long-term deals with favorable pricing. It may be easier said than done in many cases, particularly in cases where suppliers are using the assessment of new tariffs as an opportunity to raise prices. It’s critical manufacturers incorporate key protection clauses to avoid major price spikes that would be damaging to their business model when entering into an amended, extended or new supply contract.

Evaluate profit margins
With tariffs increasing the costs of goods and materials, it’s imperative for manufacturers to examine which costs they can absorb and which they’ll need to pass on to customers. This process involves understanding where a manufacturer might offset material cost increases with other efficiencies or cost rationalization, and the level of cost increase customers will tolerate. In customer contracts that have price escalation clauses or limitations, manufacturers may need to attempt to renegotiate clauses that prevent recovery of tariffs paid.

Consider free-trade zone opportunities
Too often, manufacturers overlook available opportunities provided by free-trade zones. The free-trade zone option allows companies to develop a product, then export it to a U.S. customs territory or foreign destination, potentially bypassing any tariffs on the product if it has been transformed.

Establish a dedicated trade and customs compliance group
Consider forming a trade compliance group with clear governance. Charge this group with developing strong “what-if” capabilities to understand the impact of various tariff and trade scenarios, including inventory and supply chain strategies, sourcing alternatives and modeling multiple data sources.

Take advantage of exclusion processes
When granted, exclusions apply retroactively to the date a tariff became effective. The Commerce Department reviews exclusion requests for Section 232 Steel and Aluminum tariffs, while the United States Trade Representative (USTR) provides a mechanism to request exclusions for Section 301 (China) tariffs. The Commerce Department has shown a willingness to provide exemptions in certain cases, particularly since March when the tariffs of 25 percent on steel and 10 percent on aluminum went into effect, making it all the more important for manufacturers to evaluate opportunities for exclusions.

Assess imported product classifications
Each product’s classification dictates whether or not it is included in the tariff order. Whether there is an accidental misclassification, an intentional misclassification by the overseas seller or a product that falls within a gray area, an audit of the classifications of imported goods will help manufacturers elude surprises and potential liabilities – and could even result in the avoidance of higher tariffs.

Import sooner versus later
Manufacturers with source material subject to the 10 percent tariff may want to procure more before the tariff leaps to 25 percent.

Seek out alternative sources of supply
Manufacturers should explore alternate supply sources to shield their business from the disruption caused by tariffs. They should be prepared to onboard new supply partners quickly – a process that might include partner profiles, legacy systems, custom coding and new systems to securely exchange order, invoicing, shipping and payment data.

Time will tell the extent to which new tariffs and trade policy will impact the manufacturing industry. Regardless of today’s uncertainty, manufacturers should take steps now to prepare and protect their business interests amid the shifting trade environment.

cotton fabric

Asia’s Cotton Fabric Market – China Still Dominates Exports, Despite a Raging Trade War

IndexBox has just published a new report: ‘Asia – Woven Fabrics Of Cotton – Market Analysis, Forecast, Size, Trends and Insights’. Here is a summary of the report’s key findings.

The revenue of the cotton fabric market in Asia amounted to $43.9B in 2018, increasing by 2% against the previous year. This figure reflects the total revenues of producers and importers (excluding logistics costs, retail marketing costs, and retailers’ margins, which will be included in the final consumer price). Overall, cotton fabric consumption continues to indicate a measured drop. The most prominent rate of growth was recorded in 2015 when the market value increased by 6.4% against the previous year. The level of cotton fabric consumption peaked at $57.9B in 2009; however, from 2010 to 2018, consumption remained at a lower figure.

Consumption By Country in Asia

China (1.9B square meters) remains the largest cotton fabric consuming country in Asia, accounting for 32% of total consumption. Moreover, cotton fabric consumption in China exceeded the figures recorded by the region’s second-largest consumer, Bangladesh (869M square meters), twofold. The third position in this ranking was occupied by Turkey (819M square meters), with a 13% share.

From 2007 to 2018, the average annual rate of growth in terms of volume in China totaled -1.6%. In the other countries, the average annual rates were as follows: Bangladesh (+15.7% per year) and Turkey (-0.4% per year).

In value terms, the largest cotton fabric markets in Asia were China ($13B), India ($9.7B) and Bangladesh ($4.9B), with a combined 63% share of the total market.

The countries with the highest levels of cotton fabric per capita consumption in 2018 were Turkey (9,988 square meters per 1000 persons), Bangladesh (5,219 square meters per 1000 persons) and Viet Nam (2,483 square meters per 1000 persons).

From 2007 to 2018, the most notable rate of growth in terms of cotton fabric per capita consumption, amongst the main consuming countries, was attained by Bangladesh, while the other leaders experienced a decline in the per capita consumption figures.

Production in Asia

In 2018, the production of woven fabrics of cotton in Asia totaled 6.2B square meters, going down by -4.2% against the previous year. Overall, cotton fabric production continues to indicate a measured deduction. The most prominent rate of growth was recorded in 2015 when production volume increased by 10% against the previous year. The volume of cotton fabric production peaked at 8.2B square meters in 2010; however, from 2011 to 2018, production stood at a somewhat lower figure.

In value terms, cotton fabric production stood at $46.9B in 2018 estimated in export prices. Over the period under review, cotton fabric production continues to indicate a mild decrease. The most prominent rate of growth was recorded in 2015 with an increase of 5.9% year-to-year. Over the period under review, cotton fabric production attained its peak figure level at $59.6B in 2008; however, from 2009 to 2018, production failed to regain its momentum.

Production By Country in Asia

China (3.1B square meters) remains the largest cotton fabric producing country in Asia, accounting for 50% of total production. Moreover, cotton fabric production in China exceeded the figures recorded by the region’s second-largest producer, Turkey (833M square meters), fourfold. The third position in this ranking was occupied by India (792M square meters), with a 13% share.

In China, cotton fabric production remained relatively stable over the period from 2007-2018. In the other countries, the average annual rates were as follows: Turkey (+0.1% per year) and India (-5.8% per year).

Exports in Asia

In 2018, the exports of woven fabrics of cotton in Asia totaled 2.2B square meters, leveling off at the previous year. Overall, cotton fabric exports continue to indicate a relatively flat trend pattern. The most prominent rate of growth was recorded in 2010 with an increase of 44% against the previous year. Over the period under review, cotton fabric exports attained their maximum at 2.8B square meters in 2012; however, from 2013 to 2018, exports stood at a somewhat lower figure.

In value terms, cotton fabric exports stood at $15.6B (IndexBox estimates) in 2018. In general, cotton fabric exports continue to indicate a slight reduction. The most prominent rate of growth was recorded in 2010 when exports increased by 23% y-o-y. The level of exports peaked at $22.8B in 2012; however, from 2013 to 2018, exports remained at a lower figure.

Exports by Country

In 2018, China (1.2B square meters) was the major exporter of woven fabrics of cotton, making up 56% of total exports. It was distantly followed by Pakistan (422M square meters), India (118M square meters) and Turkey (109M square meters), together generating a 29% share of total exports. China, Hong Kong SAR (97M square meters) followed a long way behind the leaders.

Exports from China increased at an average annual rate of +2.9% from 2007 to 2018. At the same time, Pakistan emerged as the fastest-growing exporter in Asia, with a CAGR of +5.9% from 2007-2018. India and Turkey experienced a relatively flat trend pattern. By contrast, China, Hong Kong SAR (-13.6%) illustrated a downward trend over the same period. From 2007 to 2018, the share of China and Pakistan increased by +15% and +8.9% percentage points, while China, Hong Kong SAR (-17.7 p.p.) saw their share reduced. The shares of the other countries remained relatively stable throughout the analyzed period.

In value terms, China ($7.9B) remains the largest cotton fabric supplier in Asia, comprising 51% of total cotton fabric exports. The second position in the ranking was occupied by Pakistan ($2.2B), with a 14% share of total exports. It was followed by India, with a 12% share.

In China, cotton fabric exports remained relatively stable over the period from 2007-2018. The remaining exporting countries recorded the following average annual rates of exports growth: Pakistan (+1.1% per year) and India (+6.2% per year).

Export Prices by Country

The cotton fabric export price in Asia stood at $7,047 per thousand square meters in 2018, going up by 9.8% against the previous year. Overall, the cotton fabric export price, however, continues to indicate a relatively flat trend pattern. The pace of growth appeared the most rapid in 2011 when the export price increased by 12% against the previous year. The level of export price peaked at $8,452 per thousand square meters in 2014; however, from 2015 to 2018, export prices remained at a lower figure.

Prices varied noticeably by the country of origin; the country with the highest price was India ($15,533 per thousand square meters), while Pakistan ($5,150 per thousand square meters) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by India, while the other leaders experienced mixed trends in the export price figures.

Imports in Asia

In 2018, approx. 2.1B square meters of woven fabrics of cotton were imported in Asia; increasing by 4.9% against the previous year. The total import volume increased at an average annual rate of +2.1% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded in certain years. The pace of growth was the most pronounced in 2017 when imports increased by 42% year-to-year. Over the period under review, cotton fabric imports attained their peak figure in 2018 and are likely to continue its growth in the near future.

In value terms, cotton fabric imports stood at $11.8B (IndexBox estimates) in 2018. The total import value increased at an average annual rate of +1.2% over the period from 2007 to 2018; however, the trend pattern indicated some noticeable fluctuations being recorded throughout the analyzed period. The most prominent rate of growth was recorded in 2010 when imports increased by 36% against the previous year. The level of imports peaked at $13.8B in 2011; however, from 2012 to 2018, imports remained at a lower figure.

Imports by Country

Bangladesh represented the major importer of woven fabrics of cotton in Asia, with the volume of imports reaching 873M square meters, which was near 42% of total imports in 2018. Viet Nam (257M square meters) held a 12% share (based on tonnes) of total imports, which put it in second place, followed by China, Hong Kong SAR (5.1%), Indonesia (5%), Cambodia (5%) and Turkey (4.5%). China (94M square meters), Sri Lanka (72M square meters), South Korea (65M square meters), Thailand (43M square meters), the United Arab Emirates (37M square meters) and Japan (36M square meters) took a little share of total imports.

From 2007 to 2018, average annual rates of growth with regard to cotton fabric imports into Bangladesh stood at +15.3%. Cambodia (+20.8%), Viet Nam (+13.7%), Indonesia (+9.6%) and the United Arab Emirates (+3.2%) also displayed positive paces of growth. Moreover, Cambodia emerged as the fastest-growing importer in Asia, with a CAGR of +20.8% from 2007-2018. Sri Lanka experienced a relatively flat trend pattern. By contrast, Thailand (-1.4%), South Korea (-2.2%), Turkey (-3.9%), Japan (-4.2%), China (-8.9%) and China, Hong Kong SAR (-12.4%) illustrated a downward trend over the same period. Bangladesh (+33 p.p.), Viet Nam (+9.3 p.p.), Cambodia (+4.4 p.p.) and Indonesia (+3.2 p.p.) significantly strengthened its position in terms of the total imports, while Turkey, China and China, Hong Kong SAR saw its share reduced by -2.5%, -8% and -16.8% from 2007 to 2018, respectively. The shares of the other countries remained relatively stable throughout the analyzed period.

In value terms, the largest cotton fabric importing markets in Asia were Bangladesh ($3.4B), Viet Nam ($2B) and Indonesia ($855M), with a combined 54% share of total imports. China, China, Hong Kong SAR, Sri Lanka, Turkey, Cambodia, Thailand, Japan, South Korea and the United Arab Emirates lagged somewhat behind, together comprising a further 35%.

Cambodia experienced the highest growth rate of imports, in terms of the main importing countries over the last eleven-year period, while the other leaders experienced more modest paces of growth.

Import Prices by Country

In 2018, the cotton fabric import price in Asia amounted to $5,633 per thousand square meters, reducing by -3.6% against the previous year. Over the period under review, the cotton fabric import price continues to indicate a relatively flat trend pattern. The pace of growth was the most pronounced in 2011 when the import price increased by 23% y-o-y. The level of import price peaked at $9,532 per thousand square meters in 2014; however, from 2015 to 2018, import prices stood at a somewhat lower figure.

Prices varied noticeably by the country of destination; the country with the highest price was China ($8,692 per thousand square meters), while the United Arab Emirates ($3,143 per thousand square meters) was amongst the lowest.

From 2007 to 2018, the most notable rate of growth in terms of prices was attained by Indonesia, while the other leaders experienced more modest paces of growth.

Source: IndexBox AI Platform