Stifel Reports on U.S. Tariffs on Chinese Imports

St. Louis, MO, April 6, 2018-Stifel releases the following statement regarding the Trump administration’s tariffs on Chinese imports, “Tuesday, April 3, the Trump administration said it would place a 25% tariff on Chinese products including flat-screen televisions, medical devices, and aircraft parts. More than 1,300 goods were added to the list that is meant to reduce China’s dominance in technologies like semiconductors, electric vehicles, and medical products. Excluded from the list are many consumer products that would negatively impact U.S. retail and consumers, such as clothing and toys. As of March, the White House only discussed tariffs that included steel (25%) and aluminum (10%) tariffs. It is estimated that China ranks only about tenth in U.S. steel imports at around $1B or 3% to 4% in 2017. About $50 billion worth of Chinese products will now be impacted by the tariffs. This list of targeted products is still under revision as a public hearing will be held in Washington May 15 to discuss the list. The amount of protective duties to be put in place has been valued as high as $60 billion so the current amount appears lower and could be lowered further considering China’s actions. A majority of China’s tariffs on the U.S. would negatively impact farming, which could hurt the industry that supported Trump in the election. As per our coverage list of mostly retail, furniture, bedding and building products, this would largely be irrelevant.

“On Monday China announced it would initiate tariffs on over 125 American products in response to the steel and aluminum tariffs discussed in March. Originally the Ministry of Commerce would begin a 15% tariff on 120 products and evaluate how the U.S. tariffs were impacting trade. A further 25% tariff could be added on eight other products, including pork. But the announcement on Monday covered all 128 products, including the 25% duty on pork. After Tuesday’s announcement of the additional tariffs to steel and aluminum, on Wednesday China announced additional tariffs on 106 U.S. products. The list includes yellow and black soybean, corn, beef, orange juice, whiskies, tobacco products, cars, some chemicals, some plastics, and aircraft. A start date has not been announced but China’s Ministry of Commerce said the tariffs are targeted for $50 billion of U.S. products.

“It is unclear to say whether the two sides can come to terms before the May 15 public hearing in Washington or when China begins to impose their tariffs. The two countries traded about $650 billion in 2016 according to the Office of the U.S. Trade Representative with U.S. exports equaling $170 billion and imports from China equaling $479 billion. The U.S. major exports in 2016 were grains, seeds, and fruit at $15 billion, aircraft at $15 billion, and vehicles at $11 billion. The major imports from China were electrical machinery at $129 billion, machinery at $97 billion, furniture and bedding at $29 billion, toys and sport equipment at $24 billion, and footwear at $15 billion. Again, these items are not on the tariff list as they would hurt the U.S. consumer directly. The White House list includes just steel and aluminum products, different machinery and parts, televisions, motor vehicles and parts, locomotive parts, airplanes, helicopters, vessels, spacecraft, medical instruments, and weapons to name a few of the 1,300 items.

“Despite the lack of direct threatened tariffs on our coverage’s products in general, we thought we would still try to define the ‘China exposure’ for our coverage list as many of our companies import either raw materials or finished goods (like steel components) and are impacted by exchange rates and the general free flow of goods between our countries.”