President Trump’s trip to Asia was one of the major trade events of the fall, and captured much of our readers’ attention during November. Our preview highlighted the likelihood of a focus on signing new deals rather than setting up new trade relationships. We were mostly right – except for a bilateral trade agreement process that was started with President Duterte of the Philippines – with our breakdown of $253 billion of commercial deals being struck in China being a highlight.

The single most-read article was the write-up of our China Trade Opportunities webinar, where attendees wanted to know more about the state of the solar power industry and responses to U.S. cases. Our deep-dive into the Chinese government’s decision to cut 187 consumer-products tariffs also got attention – we noted it may not have been necessary given the surge in imports so far. In logistics the activities of the freight forwarders, including Expeditors’ sector-leading results, garnered the most interest. Finally back in the U.S. the disappointing fifth round of NAFTA talks, the trade review of washing machines and Black Friday bargains all made it into the top 10.

#1 The $4 Trillion China Trade Opportunity (Nov 15) We held a webinar on November 15 to discuss the opportunities in China’s $4 trillion trade economy including the policy environment, the preoccupations of our China-based customers (one word: Trump) and six major sectors. Questions asked included: the state of Chinese solar power exports to the U.S. (not good); buyer responses to U.S. trade cases against Chinese exports (buy somewhere else, raise prices); and the impact of Chinese government regulations (state-owned enterprise reform matters more than the environment). A recording of the webinar is available via the link.

Chart U.S. imports of solar cells and panels by shipper. Source: Panjiva

#2 President Trump Goes To Asia (Nov 1) The major trade policy event in the month was President Trump’s Asian roadshow, which was widely expected to focus on national security and trade – often the two were intertwined. Our preview got many things right (no major policy launches, a focus on commercial deal announcements) but a couple wrong (see #8 below). As outlined in our follow-up report of 11/14 it was clear the administration were happy that their “deficit must fall” message had been delivered.

 

#3 UPS beats Expeditors, at a cost (Nov 9) U.S. import performance data for the freight forwarders in November provided the first data read after their third quarter earnings reports. UPS led the way with a 27% rise in volumes vs. a year earlier. Meanwhile Expeditors only gained 2%, but that followed it maintaining best-in-class profitability after shedding market share in the third quarter (see item #6 below).

#4 187 ways to grow $35 billion of exports (Nov 27) The Chinese government’s decision to cut imports tariffs on 187 products was clearly aimed at boosting consumer spending. They may prove unnecessary. Our analysis showed Chinese imports of the products involved reached $34.7 billion in the past 12 months, having risen 33.9% in the third quarter on a year earlier. That took them to the highest since at least 2013. Food and cosmetics were the leading categories.

Chart shows sum of Chinese imports of 187 tariff lines segmented by product class: food, pharma, cosmetics, apparel, home appliances and others. Source: Panjiva

#5 Trump trade strategy in a $90 tariff (Nov 21) The conclusions of the second section 201 “safeguarding” review, which is focussed on large residential washing machines, emerged during the month. The ITC proposed to President Trump that 50% tariffs be applied to imports over 1.2 million units a year. We calculated that’s equivalent to $90 per machine, or 11% of average list prices. The President has yet to act though – near month end the USTR requested further consultations with the public, as outlined in our 11/29 analysis.

#6 Expeditors leads the forwarders forward (Nov 8) Expeditors International reported third quarter revenues that were 5% better than expected, with the ocean freight business turning in its first unit revenue growth since 1Q 2016. Even allowing for that apparent discipline the company was still the fastest growing of the six forwarders Panjiva covers. It also hed the best profitability, with an EBITDA margin of 11% putting it at the top of the table, where it’s been since at least 2013.

#7 41 changes, NAFTA basics stay the same (Nov 20) The NAFTA negotiations had another torturous month. Ahead of round five the USTR published changes in its negotiating stance – our assessment found 41 significant changes. Most related to trade-in-goods and include: dealing with import/export monopolies; regulatory convergence in six sectors; specific references to Canada dairy/poultry tariffs and improved U.S. market access for beverages; rules-of-origin with U.S.-specific elements, that notably are not just limited to autos; and improved market access for U.S. healthcare products. Sadly the round ended without much success, with the next “full” round put back to January (December will see technical discussions only).

Chart compares U.S. imports of pharmaceuticals (HS 3003/3004) to medical devices (HS 9018) on a trailing quarterly total basis.  Source: Panjiva

#8 Trump does a Duterte deal (Nov 17) We hadn’t expected any new bilateral trade processes to start during President Trump’s trip. We were wrong. One little-noticed element of President Trump’s recent Asia visit was an apparent agreement with President Duterte to structure a free trade agreement between the U.S. and the Philippines. Greater access to the U.S. market makes sense for the Philippines, with trade focussed on just three areas (semiconductors, apparel and agriculture). The U.S. meanwhile may want increased access to the Philippines’ fast growing healthcare sector.

#9 $253 billion, but no reset in China (Nov 9) The headline figure for the President’s trip to Asia though was the $253 billion in commercial agreements signed. We took a deep dive into the figures involved, and while it’s easy to be skeptical the deals with Boeing, Qualcomm and in the agricultural sector could all make a difference to the U.S. trade deficit longer-term. Upon returning from the trip though the section 301 review of Chinese IP practices continued, and a “self-initiated” aluminum trade case against China was launched (see our 11/29 report for more).

#10 Black Friday bargains (Nov 20) Aggressive discounting can frequently follow aggressive importing around Black Friday / Cyber Monday (or indeed the broader shopping fortnight that accompanies the two). Our review of major import lines showed shipments of washing machines spiked (see #5 above) and laptop computers (particularly by HP Inc) were markedly ahead of a year earlier, and so might have opportunities for bargain hunters.

Chart segments U.S. imports by HS-code based product category for videogame consoles, TV sets and laptop computers. Source: Panjiva