The U.S. has launched five "301 investigations" against China in its history, all with basically the same result. But this time in the US-China trade war, US President Donald Trump has adopted a different strategy than previous US administrations.
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The United States launched a "301 investigation" into China in 2010, and this round of investigations began in 2017, coinciding with the "seven-year itch". seven-year itch".
U.S. President Donald Trump signed a presidential memorandum on March 22, based on the results of the "301 investigation", will impose tariffs on 60 billion U.S. dollars (about 380 billion yuan) of products from China, and restrictions on Chinese companies to invest in the U.S. mergers and acquisitions.
On March 23, the Commerce Ministry said it intended to impose tariffs on $3 billion of products imported from the US.
The US-China trade war is "on the verge of breaking out"
President Donald Trump signed a presidential memorandum on March 22 that, based on the results of the "301 investigation," he will impose large-scale tariffs on imports from China and restrict Chinese companies from investing in the US and merging and acquiring with Chinese companies. investment in the United States and mergers and acquisitions. Trump told the media before signing at the White House that the scale of Chinese goods involved in the tax could reach 60 billion U.S. dollars.
To this, the Chinese Embassy in the United States responded that China does not want to fight a trade war, but never fear a trade war, and has the confidence and ability to deal with any challenge. If the U.S. side insists on fighting, we will accompany them to the end and take all necessary measures to firmly defend their legitimate rights and interests.
The spokesman for the Ministry of Commerce said in a statement on the U.S. 301 investigation decision that China does not want to fight a trade war, but is by no means afraid of a trade war; in any case, China will not sit idly by and watch its legitimate rights and interests being harmed, and it is fully prepared to firmly defend its legitimate interests; it has the confidence and ability to cope with any challenge; it is hoped that the U.S. side will pull back from the brink and make a careful decision, and will not drag the bilateral economic and trade relations into a dangerous situation. I hope that the U.S. side will stop at the precipice and make prudent decisions, so as not to drag bilateral economic and trade relations into danger.
Chen Fuli, director of the Department of Treaty and Law of the Ministry of Commerce, said that the next step will be to pay close attention to the progress of the 301 investigation, and once the U.S. measures are implemented, China will be resolute.
In addition, China's Ministry of Commerce released a list of suspended concessions against the U.S. imports of steel and aluminum products 232 measures early on March 23 and solicited public comments, intends to impose tariffs on some products imported from the U.S., in order to balance the losses caused by the U.S. tariffs on imported steel and aluminum products to the interests of the Chinese side. Among them, tariffs are planned on $3 billion worth of U.S.-made fruits, pork, wine, seamless steel pipes and more than 100 other commodities.
The list tentatively contains seven categories and 128 tariff products, involving about $3 billion of U.S. exports to China based on 2017 statistics. The first part*** counts 120 tariff items, involving U.S. exports to China of 977 million U.S. dollars, including fresh fruits, dried fruits and nut products, wine, modified ethanol, American ginseng, seamless steel tubes and other products, and is proposed to impose a tariff of 15%. The second part*** counts eight tariff items, involving $1.992 billion of U.S. exports to China, including pork and products, recycled aluminum and other products, and is proposed to impose tariffs of 25 percent.
(Photo: Globe)
Global market jitters
Global financial markets were generally shaken by the impact of trade friction between China and the United States.
On the stock market front, on Friday, the Shanghai Composite Index closed down 3.39 percent at 3,152.76 points, the biggest drop since Feb. 9, while the Shenzhen Composite Index fell 4.02 percent to 10,439.99 points, and the Growth Enterprise Market Index dropped 5.02 percent to 1,726.02 points. The two cities traded 635.312 billion yuan, compared with the same period last day significantly enlarged. For the week, the Shanghai index fell more than 3.5 percent and the GEM index dropped 5.23 percent.
Hong Kong's stock market retreated across the board, with the Hang Seng Index closing down 2.45% at 30,309.29 points, down 3.79% weekly; the National Enterprise Index down 2.41% at 12,128.27 points, down 4.03% weekly; and the Red Chip Index down 2.17% at 4,418.11 points, down 1.8% weekly. Turnover in the market rose to HK$283.445 billion for the day, a record high since April 2015, and just a step away from the all-time high of HK$291.529 billion, compared with HK$151.933 billion in the previous session.
(Image from real-time quotes of Hong Kong stocks in Wandel Terminal)
Asia-Pacific stocks also closed sharply lower across the board. Nikkei 225 index fell 4.51%, down 4.88% weekly; South Korea Composite Index fell 3.18%, down 3.10% weekly; Taiwan weighted index fell 1.66%, down 1.65% weekly; Australia's ASX200 index fell 1.96%, down 2.39% weekly; New Zealand's NZX50 index fell 0.99%, up 0.30% weekly.
The futures market, Friday, most of the domestic commodity futures night session fell, iron ore closed down 1.9%. Coke closed down 1.37%, coking coal and power coal closed up 1.09% and 2.12% respectively. Vegetable oil, soybean oil, palm oil closed down 0.49%, 0.7%, 1.09%. In addition, rebar and hot rolled coil closed down 2.6% and 1.14% respectively. Rubber closed down 5.82%, asphalt closed up 2.87%.
In the currency market, on Friday, the offshore yuan against the dollar rose above the 6.32 mark, up 200 pips during the day, setting a new high since March 20th. The onshore yuan closed at 6.3240 against the dollar at 16:30, down 28 basis points from the previous session and up 7 basis points this week. CNYUSD mid-price depreciated 105 basis points at 6.3272.
The bond market, risk aversion boosted the bond futures closed sharply higher, the 10-year and 5-year main contract rose 0.64% and 0.29%, respectively, both hit a five-month high. Inter-bank spot yields fell sharply, 10-year treasury active coupon 170215 yields once down more than 16bp lowest touched 4.67%, hitting a more than four-month low; the second active coupon 180205 yields down 15.01bp at 4.63%, the lowest intraday touched 4.60%; 10-year treasury active coupon 180004 yields down 4.75bp at 3.70%. 3.70%.
European and American stock markets plunged again on Friday. The Dow closed down more than 400 points or 1.77% at 23,533.20, a new low since Nov. 22 last year; the Nasdaq closed down 2.43% at 6,992.67; the S&P 500 closed down 2.1% at 2,588.26 points. For the week, the Dow fell 5.63 percent, the Nasdaq 6.54 percent and the S&P 500 5.95 percent, all the biggest single-week losses in more than two years.
Europe's three major stock indexes fell collectively. Britain's FTSE 100 index closed down 0.44% at 6921.94 points, a 15-month low, a weekly loss of 3.38%; France's CAC 40 index closed down 1.39% at 5095.22 points, a weekly loss of 3.55%; Germany's DAX index closed down 1.77% at 11,886.31 points, a new 12-month low, a weekly loss of 4.06%.
Overseas commodities, COMEX gold futures closed up 1.48% at $1,352.9 an ounce, a five-week closing high, up 3.09% for the week, while COMEX silver futures closed up 1.06% at $16.56 an ounce, up 1.77% for the week.
NYMEX crude oil futures closed up $1.44, or 2.24 percent, at $65.74 a barrel, an eight-week high and up 5.34 percent for the week.
Listed companies respond to trade war impact
A number of A-share listed companies on Friday (March 23) responded to the impact on their business in response to "Trump's signing of a memorandum to impose tariffs on Chinese goods".
Crystal photoelectric said the company's export business to the U.S. is relatively small, the impact is not significant.
Changying Precision said that although some of the company's customers are U.S. companies, the vast majority of the company's products are shipped to companies within the country, and the impact of the tariff increase on the company is minimal.
Kai Zhong Precision said, the company for the well-known auto parts manufacturers global supply, direct delivery to the United States mainland accounted for a small proportion of the U.S. trade war on the company's performance has no direct impact.
Sharonda A said, the company's business in the global dispersion is very high, when a particular country or region of the trade barriers and tariff policy changes, the company will correspondingly make timely and appropriate business structure adjustment. If there is a "trade war" between China and the United States, it will have an impact on the company's business, but it will not be great.
Yangpu Medical said, the company's international trade, the main customers are concentrated in Europe, South America and Asia and other regions, the U.S. trade accounted for a small proportion of the main revenue.
Xinwei Telecom said it has not had any impact on the company's business, and the company's cooperation with customers is normal.
Fangda Carbon said that in 2017, the export of 150 million yuan to the United States, accounting for 1.89% of the total revenue for the year, the impact on the company's operating results is not significant.
Bayi Iron and Steel said the company has no products exported to the United States.
Shunfa Hengye said its business in the U.S. is real estate investment and does not involve exporting products.
Shenghong Technology said the company's product sales in the United States accounted for about 0.82% of the company's revenue, the U.S.-China trade war has basically no impact on the company.
Rebecca said that although the company's exports to the U.S. a larger proportion, but the wig niche industry is more niche, the U.S. companies do not constitute a competitive relationship, will not have an impact on the company's business.
Chenfeng Technology said on the interactive platform, the company's products about 20% sold abroad, the main foreign markets, including India, Southeast Asia, the European Union and so on. The company's main export countries or regions have not set up special trade barriers, the trade dispute, the impact on the company is relatively small.
Igor said the company's products are all with independent intellectual property rights, the U.S. increased tariffs on the Chinese side of the company has no direct impact on the company yet.
BOE said the 2017 interim report showed that the Americas amounted to 2.5 percent of revenue.
Tyson Wind Energy said that the United States as early as 2012, the United States on China's application-level wind tower implementation of "double reverse", the company in recent years has no batch products exported to the United States. Even if the United States launched a trade war with China, the company's exports have no impact.
Kelaiying said, China and the United States as the world's two largest economies, the so-called trade war will greatly damage the fundamental interests of the two countries and the majority of consumers.
Lianhua said the company is confident that it can maintain and further enhance the good cooperative relationship with customers with its products, technology and comprehensive advantages.
Continental Technology said, the company's products are exported globally, in the United States does not form a high export dependence, and the LED small-pitch display is a very subdivided field, may not be in the directory of the tariff increase, and at present did not receive the notice of the levy. The company will closely track this matter, and actively find ways to resolve the crisis.
Yinlun shares said that in 2017, our company's direct exports to the United States amounted to about 280 million yuan, accounting for about 6.7% of the total operating income. In addition, the specific tariff increase catalog has not yet been determined, the specific impact on our company can not be judged at present.
Helenzer said, the U.S. trade war from the perspective of long-term development, is conducive to promoting Helenzer to speed up independent research and development, production of insulated boom aerial work truck products.
Cross-border pass said that the mode of cross-border trade mainly has two kinds of B2B and B2C, of which the B2B mode is mainly the traditional cross-border trade, and cross-border e-commerce platform is the B2C mode. Upon investigation, our company's 2017 operating income of 40% from the U.S. market, of which general trade exports to the U.S. overseas warehouse income accounted for a conservative estimate of about 45%, the remaining 55% or so for the express parcel form of mail. Assuming that this U.S. tariff increase will have an impact on 30% of the categories exported to the U.S., we expect the impact on the company's revenue range to be no more than 6%. In response to this impact, the company will focus on the development of other unaffected categories of products, postal methods as much as possible to take from the domestic send small parcels, in order to reduce the impact of this U.S. tax on the company. The trade war further squeezes the traditional B2B profit margins, while B2C trade will not be affected too much, on the contrary, the B2C cost advantage will be further emphasized. From the direction of cross-border import business, at present, the company's import procurement business from the U.S. market of about one ten thousandth, so even if China raises import tariffs on U.S. trade, the company's import business will not be affected for the time being.
Huaying Agriculture said the company's agricultural and sideline products are not exported to the U.S. for the time being, while the company is also actively studying the impact of relevant policies on the company.
Shennan Electric Road said the company will closely monitor the progress of the situation and take necessary measures in time.
Gold River Bio said, our company is the world's largest producer of chlortetracycline production, products in the United States, Canada and South America market has a strong competitive advantage. The U.S.-China trade war will not have a substantial impact on the company.
Shanghai Steel Union said, for the overseas market, the company is still in the stage of experimentation; Sino-US trade war will not have a direct impact on the company's business in the short term.
Easiest said, the company did not differentiate a particular regional market, the market in each region have focused on synchronized development. The trade war will not have a greater impact on the company's business.
Florida said, the company's gas source structure is diversified, the trade war on the purchase price impact is small.
Colliers said reports and policies on Trump's trade war with China are not yet clear, and the impact on the company's business is also limited.
Fuling said the company's export business accounted for a small proportion and had little impact.
Henghua Science and Technology said that the company's overseas business income accounted for a very small proportion of the main business income, in the early stage of market expansion.
Long Cable Technology said the company's products are not currently sold in the United States.
Skimming off the relationship even if, there are listed companies simply began to call for China to impose tariffs on U.S. products. For example:
Dongfang Group said on the interactive platform, China's largest share of U.S. agricultural imports is soybeans and other products, China intends to impose tariffs on U.S. agricultural products, etc., is conducive to enhancing the competitiveness of the relevant domestic agricultural industry, the company's performance will have a positive impact.
What industries will be affected?
For the main areas affected by the trade war, CICC believes that there are:
1, from the signing of the memorandum of understanding, the first to bear the brunt is for China plans to impose additional tariffs of 25% of the industry, especially in the field of aviation and aerospace, information and communications technology, machinery;
2, the U.S. trade accounted for the higher industry will also be affected. From the current U.S.-China trade industry structure, China's exports to the U.S. are mainly machinery, equipment and instruments (according to the classification of the main categories of home appliances, electronics, etc., accounting for 48% of the total exports), as well as miscellaneous products (12%), textiles (10%), metal products (7%) and so on. U.S. exports to China, on the other hand, are concentrated in machinery, equipment and instruments (30%, mainly capital goods), transportation equipment (20%), chemical products (10%), and plastic and rubber products (5%).
Here's a list of A-share listed companies with a larger share of U.S. revenues (2016, top 100):
Is Xiangzhuang dancing with a sword?
Just as the market is judging the possible risks posed by the U.S.-China trade dispute, some institutions have analyzed that this time the U.S. has launched a trade war, which may not be aimed at improving bilateral trade figures, but has a bigger motive.
Industry research believes that the U.S.-China trade imbalance is only the pretext and initial goal of the U.S. trade war claims, but to contain China to catch up with the "war of the limits", is a more important motive, which is still ignored by most people.
March 1, the Office of the U.S. Trade Representative would like to Congress submitted a report on Trump's trade policy, the report pointed out that the United States will use "all available tools" to prevent China from "destroying true market competition.
And the U.S. 2018 Trade Policy Outline and 2017 Annual Report clearly states, "To ensure U.S. leadership in research and technology, and to protect the U.S. economy from competitors who unfairly acquire our intellectual property. In response, the U.S. launched a 301 investigation (against China) to stop China from acquiring (U.S.) technology and intellectual property through unreasonable and discriminatory measures."
Learning from history: 5 "301 investigations" all point to the same result
In fact, this is the sixth time that the U.S. has targeted China's "301 investigations", and looking back at the history can be found, the first five times the final result is the same.
Bank of China Zhu Qibing, Huaxia research report that, from historical experience, China and the United States are expected after a localized trade conflict will still return to compromise, the possibility of evolving into a full-scale trade war is unlikely.
The study analyzes that historically the United States has launched five 301 investigations against China, and from the historical results, the two sides eventually reached a compromise, and did not evolve into a full-scale trade war. 301 is more of a means for the United States to gain an advantage in negotiations.
China Merchants Securities Xie Yaxuan research statistics, in the 1990s, the United States had three times on China's "special 301 investigation", respectively, in 1991, 1994 and 1996. After WTO accession, in October 2010, the Office of the U.S. Trade Representative announced that, in response to the application of the United States Steelworkers Federation, will be in accordance with the "U.S. Trade Act," Section 301, the Chinese government has developed a series of new energy policies and measures to launch an investigation. This is the first time since China's accession to the WTO, the United States used "Section 301" to investigate the trade behavior of other economies, and ultimately China and the United States in the WTO dispute settlement mechanism under the consultations, agreed to amend the "wind power equipment industrialization of special funds Interim Measures for the management of the content of the allegedly prohibited subsidies.
Zhu Qibing, Huaxia research report that, at present, about half of the total U.S. trade deficit from the trade with China, but the current deficit is more reflective of the U.S. and China in the global economic system in the division of labor of the different, and the U.S. to China part of the deficit comes from the U.S. to China to implement export restrictions on high-tech products and other products. Overall, a full-scale trade war is a lose-lose result. The report argues that the 301 investigation is still a means for the United States to gain a negotiating advantage, and the United States and China are expected to return to a compromise after a localized trade conflict, which is unlikely to evolve into a full-scale trade war.
Tianfeng Securities Song Xuetao research report analyzes, only in the United States on China's imports tax rate at 10%, 15% and 25%, China is likely to lose less than the United States loss in a trade war, if Trump can use presidential power, bypassing the Congress in the 150-day period to raise tariffs to 15%, then China to take tariffs increased to 25%, 35%, 45% and full-scale boycott could all be effective counterattacks against the United States. But if the U.S. raises its tariffs to 35% and 45%, China will suffer more than the U.S. regardless of which retaliatory measures it takes.
If the U.S. raises tariffs on China to 45 percent, even if China adopts a full boycott of restrictible industries, China's losses from the trade war will still be greater than the U.S. losses from the trade war.
But the report argues that the trade war may not unfold smoothly, or that it may not break out in a full-scale, aggressive form, but rather in the form of localized, gradual trade friction.
On the one hand, the U.S. itself would be dealt a major economic blow, with the U.S. private sector losing 1.3 million jobs, or 1 percent of the total number of jobs in the private sector, even if a short-lived trade war occurs, according to the U.S.-based Peterson Institute for International Economics' calculations. On the other hand, the U.S. president's maximum authority can only impose tariffs of no more than 15% on all imports within a 150-day period, and Congress has veto power over tariff proposals above 15%, while the relationship between Congress and the business community cannot be ignored. As the No. 1 U.S. trading partner, China could have a negotiating position with the U.S. by virtue of trade countermeasures against imports from the U.S. in sectors such as agricultural products, electromechanical, and aircraft, which could make the tariff proposal subject to opposition from the U.S. business community.
China and the United States if a trade war, in fact, are not to pure trade protection for the purpose of Trump hopes that if the increase in tariffs to force the appreciation of the renminbi or high-end manufacturing industry back to the flow of China's trade countermeasures are also hoping to have negotiating chips in exchange for China's deepening of the reform of the time. It is because their respective intentions are not in trade itself, the likelihood of a full-scale trade war is not high, the future may be more common is a localized, gradual trade friction between China and the United States.
What are the implications for China?
Taking into account that the dispute may eventually lead to a "loud thunder, little rain" situation, the market is generally cautious optimism.
Haitong Securities said there is no need to panic, and the market's medium-term trend depends on fundamentals. Memorandum of focus in the field of intellectual property and high-tech, the recent accumulation of a certain rate of increase in the pressure of science and technology stocks on the high side, taking the opportunity to de-hypocrisy, value stocks since February pullback consolidation, valuation profitability match is better.
CICC also believes that actively deal with the possible short-term impact, the medium and long term need not be too pessimistic. Its report analyzed that the intensification of trade friction between the United States and China to a certain extent, affecting investors from the net export level of China's economic growth judgment, especially in the recent divergence on the growth of the point of time, the short-term market sentiment and risk appetite may have a certain impact. The extent of the specific impact of the medium and long term will depend on the breadth and depth of the subsequent trade war to judge, but considering the current resilience of China's domestic demand and more ample policy buffer, we believe that the prospects for China's economic growth and the performance of the capital markets do not have to be overly pessimistic, the short-term market, if there is a continuous and wide range of over-adjustment instead of for investors to provide a better time to enter the market.
In addition, authoritative international rating agencies also believe that the trade war will have a limited impact on China and the global economy.
Fitch, one of the three major international rating agencies, released its latest view that the U.S. action to impose tariffs on $50-60 billion of Chinese goods is unlikely to have a significant impact on China or the global economy. China will be able to resolve its tariff problems with the US, but trade risks will increase.
Fitch said the $60 billion is equivalent to about 2.5 percent of China's total merchandise exports to the U.S., or 0.5 percent of China's GDP, but the tariffs would have a much smaller impact on the Chinese economy. The goods will end up going to the U.S. due to a lack of substitutes, while other goods may move to different markets. U.S. tariffs on $50-60 billion of goods currently in China would be no more than a 0.1 percent drag on China's GDP growth.
Fitch said that sporadic protectionist measures have escalated into a "more destructive trade war" in recent months. The bigger risk now is that the U.S. will eventually impose tariffs on China across the board. The U.S. accounts for nearly one-fifth of China's total exports, equivalent to 3.6% of the country's GDP, so broad-based tariffs could have a sizable impact on China's economy, as well as ripple effects elsewhere in Asia due to supply chain relationships. In addition a trade war between the US and China could undermine global investor confidence.
Moody's, on the other hand, said the ratings of Chinese companies would not be affected by the trade dispute. According to the preliminary assessment, the measures announced by the US government so far will have limited impact on China's economy, but the assessment could change if there are wide-ranging protectionist measures in place.
China's economic growth is less dependent on exports than it was 10 years ago; the contribution of net exports to GDP growth is also much lower than it was 10 years ago - averaging 0.1 percentage points in 2015-2016, compared with an average of 3.4 percentage points in 2005-2007, according to the Moody's statement.
The industry-specific tariffs that have been announced so far will not materially harm China's exports, which are limited to the U.S. market, including tariffs on photovoltaic panels, washing machines, steel and aluminum. If the U.S. significantly expands the tariffs and adopts broad protectionist measures, the negative impact would be greater.
Moody's said the increased focus on bilateral rather than multilateral trading arrangements would be credit negative for Asian economies.