Delay of the Trade War Fully Favors Tire Industry

SCI99

2019-02-28

Delay of the Trade War Fully Favors Tire Industry

The seventh round of China-U.S. high-level economic and trade consultations was officially ended yesterday. The Xinhua News Agency said that the two sides have further implemented the important consensus reached at the meeting in Argentina. Substantial progress has been made on specific issues such as technology transfer, intellectual property protection, and non-tariff barriers.

U.S. President Trump announced on his Twitter on February 24 that he will postponeto increase the tariffs on China’s exports to the U.S. on March 1. After more than two hours, he said to the media that if everything goes well, some very important news will be released in the next week or two.

Some commentators said that the final consultation results have not yet been announced, and it does not mean that the trade war will be terminated, but the delay in the increase of tariffs is still good news for Chinese companies. The buffer period for exports will be extended.

Market players said that the United States has always been an important export destination for Chinese enterprises. In 2017, the total value of automobile tires (passenger tires and truck tires) exported by Chinese manufacturers to the United States reached $1.618 billion (approximately RMB 11.245 billion). The later the 25% tariff is increased, the longer the “honeymoon period” of China’s tires and even the rubber industry can last.

For China’s rubber industry especiallytire industry, the influence of a trade war is huge. Unlike other products such as auxiliaries and carbon black, the profit margin and added value of tires are not high. Moreover, it is hard for the costs increment by the additional tariffs to be passed to downstream traders. The costs that companies can save since March 1 are huge.

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