300 Billion The Threat Of Tariffs Has Become The End Of The Battle. Textile And Garment Enterprises Are Facing A Small Profit.

Recently, US President Trump said that the US side will impose a 10% tariff on US $300 billion export to China in September 1st. This happened when the heads of state of the two countries met in Osaka not long ago to reach a consensus, and the two countries' economic and trade teams just held high-level consultations, which made the world startled. The major capital markets in the world responded fiercely. Though somewhat unexpected, the Chinese government and the Chinese people have experienced many "capricious" times before, perhaps more or less accustomed to it.

Although the total amount of this tariff threat is 300 billion, which is even higher than the total volume of the previous three rounds, and once the implementation implies that the United States has imposed additional tariffs on all goods imported from China, it is psychologically easy to feel that the threat and harm to China will be greater. But after rational analysis, it is easy to conclude that the tariff threat of the 300 billion goods is only a strong end, and that its harm to China is not as great as expected, but its harm to the United States itself will be more obvious.

The US has long run out of "cost-effective" weapons - the remaining $300 billion is hard to replace.

In the tariff war, the parties will give priority to the Levy of duties on the smaller ones and the larger ones which are more harmful to each other. These varieties show that it is easier for them to find an alternative to the importing country, and the export of the other party is more dependent on the domestic market. For example, China's choice of agricultural products as a counter American measure is based on this principle.

In fact, the first few rounds of tariff list in the United States also clearly embodied this principle. For example, the varieties involved in the first two rounds of the 16 billion and 34 billion lists are relatively scattered, which is a variety that China does not have absolute superiority. This means that American consumers and enterprises are easy to find alternatives. Therefore, the first two rounds of tariff increase are relatively difficult.

In the third round of the 200 billion list, the domestic opposition was much more pronounced, because there were fewer and fewer varieties of "cost performance". In order to make enough of 200 billion, cotton and paperboard products were also selected as the dominant sectors in China. The greater the advantage of China, the greater the difficulty of American substitution.

The last 300 billion of them contain much of China's large share of the global export market and its absolute superiority, such as textiles and clothing, steel and so on. It is almost impossible for the us to find an alternative. As a result, the US government will face unprecedented objections to impose tariffs on the last 300 billion commodities.

Tariffs on the remaining 300 billion will be mainly borne by American consumers and enterprises.

Tariff is the tax collected in the process of import and export transaction, which directly leads to the increase of transaction cost, and the transaction cost mainly depends on the position of buyers and sellers. When the buyer lacks the alternative and the seller is in a relatively advantageous position, the cost of Taxation will be mainly borne by the buyer. This may be a relatively intuitive experience for the domestic population. For example, in the previous years, the real estate market was more popular, and when the supply was in short supply, the original taxes and income taxes levied on the sellers were basically transferred to the buyers. It can be seen that the cost of transaction depends on the dominant position of the two parties in the transaction, not on whom to levy.

The remaining 3000 billions of varieties are China's absolutely dominant varieties, which occupy a large share of the global export market. In this case, the added tariffs will be mainly borne by the American consumers and enterprises, and will not affect the total share of China's related varieties.

We collected and collated 12 cases of dual anti investigation launched and adopted by the United States in the past ten years. In the year after the implementation of the high anti-dumping and countervailing duties, the amount and amount of goods exported to the United States declined significantly, but only 3 varieties had a certain decline in the total export of the world, while the remaining varieties still maintained a relatively high growth rate.

It can be seen that in the United States, the high tax rate will directly affect exports to the United States, but the global economy is interconnected. Even under the principle of origin, the market still has a strong regulatory power, and there has not been a general decline in the volume and amount of exports worldwide.

Of course, the varieties investigated and passed by "double reverse" are definitely the most competitive varieties of products such as cost and price. They do not have a wide range of representativeness, but most of the remaining 300 billion commodities are varieties with obvious advantages.

Moreover, the "double reverse" levy is a penalty rate of tens to several times, while the duty on 300 billion levy is 10% or 25%. Therefore, referring to the rule of "double reverse" case, adding tariffs may significantly affect exports to the United States, but the impact on global exports of related varieties may not be too great.

In the past ten years, the United States has adopted anti-dumping and countervailing cases to China's products.

Domestic textile and garment industries enter the era of "meager profit" - adding tariffs will not bring fatal impact.

How much will the tariffs be imposed on 300 billion commodities and the impact on domestic related industries? First of all, it will definitely have obvious effects, but it will not bring any fatal impact. Before seeing some studies, the domestic textile and clothing, toys and other export business profit margins were low to only a few percentage points, which suggests that the Levy of 10% or 25% tariffs will bring "disaster" to these enterprises. But I think this view is static, too simple.

Take the textile and garment industry as an example, according to the Statistics Bureau, the sales profit margin of textile and clothing industry has fluctuated around 5.5% in recent years, which is lower than before 2010. Does the "low profit" level mean that the export business of these spinning and weaving enterprises will suffer from the 10% or 25% tariff?

The low profit level of the whole industry does not explain the position of domestic spinning and weaving enterprises in the international market. Judging from the share of the global export market of textile and garment industry, the domestic textile and garment enterprises have absolute advantages. Despite the decline in recent years, China's textile and garment industry still has more than 34% of the global export market, while less than 5% of India and Vietnam are ranked second, third.

On the one hand, the level of profit margins remains low, and on the other hand, the share in the export market takes an absolute advantage. This shows that the level of profit is more than the result of full competition among domestic manufacturers, rather than being squeezed by foreign competitors. Therefore, tariffs on Chinese manufacturers will not directly erase the profit margins, nor will they bring about the ultimate disaster.

In fact, another data can also illustrate this problem. In recent years, the cost of front-line workers in China has increased rapidly, and the magnitude is far greater than the 5.5% level of profit. If 10% tariffs are imposed, it will bring about a catastrophe.

Take the textile and garment industry as an example, according to statistics, in the past two years, China's textile and clothing exports accounted for about 16% of the total exports to the United States, while the proportion of textiles and clothing imported from the United States accounted for about 36%. It can be seen that in textile and clothing products, the dependence of US imports on China is significantly higher than that of China's exports to the United States.

If not some high-end brand clothing (mainly European and American brands), in the ordinary people's textile and clothing demand, the United States has a higher degree of dependence on China's imports. As a result, tariffs on textile and apparel products will fall on the average consumers in the United States, and will have a certain impact on Chinese manufacturers, but it will not bring any fatal impact.

Therefore, we should not limit the gains and losses of evaluating trade frictions to the gains and losses of trade with one country, but rather evaluate the trade status of China from the change of the total trade volume of all countries and regions in the world in Global trade. So long as we believe in free trade and fair trade, China's position in Global trade can be improved.