The Edge - Volume One

Figure 4: Exports – Mainland China to the globe/U.S. (Normal tariffed exports/Higher tariffed exports (August 2018)) – U.S. to the globe/Mainland China (Normal tariffed exports/Higher tariffed exports (August 2018)) (2017/2018)

Higher tariffed exports to China,

Higher tariffed exports to the U.S., 3.9%

To mitigate the impact of increased tariffs, both Chinese and U.S. companies could:

6.0% Normal tariffed exports to China, 1.6%

Normal tariffed exports to the U.S., 15.0%

> > Divert some of their exports to other existing secondary national markets that are unaffected by higher tariffs (Figure 5) > > Open and develop new secondary national markets, then switch some of their exports to those markets > > Sell more into their large $13.3 trillion domestic consumption market (in the case of the U.S. in 2017) or burgeoning $6.6 trillion domestic consumption market (in the case of China in 2017) (Figure 6) > > Move/ramp up some manufacturing to new/other existing secondary markets to get around export tariffs > > Move/ramp up some manufacturing to/in the U.S. (for Chinese companies) or to/in Mainland China (for U.S. companies) > > Carry on as usual if their nation’s currency weakens enough to offset the higher tariff charge on their exported goods and products With currently 7.6 percent of its exports going to China, the U.S. is less exposed to tariffs from China. In China’s case, 18.9 percent of its exports are sent to the U.S., making it important for Chinese companies to consider further developing other existing secondary markets or seeking new secondary markets for their exports if the trade dispute deepens and becomes prolonged. This could be of greater consequence in the future, given duties implemented or proposed by the U.S. now stand at more than 7,000 tariff line items covering $250 billion of imported goods and products from China. It is possible that some U.S. companies may need to seek or develop other secondary or new markets for their exports as a result of recent escalation in tariffs. However, if the U.S. is tackling a trade conflict on several fronts at that time, it might limit the opportunites for U.S. companies to further develop existing secondary markets.

Mainland China

The U.S.

Other exports to the global, 92.4%

Other exports to the global, 81.1%

Source: General Administration of Customs, P.R. China, U.S. Census Bureau, Cushman & Wakefield Research

Figure 5: Major export destinations - Mainland China and the U.S. (2017)

Others, 17.0%

United States, 18.9%

South Africa, 0.7% New Zealand, 0.2%

Russian Federation, 1.9% Taiwan, 1.9% Australia, 1.9% Brazil, 1.4% Canada, 1.4%

Mainland China

EU, 16.5%

South Korea, 4.4% India, 3.2%

Japan, 5.9%

ASEAN, 12.8%

Hong Kong, 11.9%

Others, 20.4%

Canada, 18.2%

United Arab Emirates, 1.1%

Australia, 1.5% Italy, 1.4% Switzerland, 1.4%

The U.S.

Mexico, 16.0%

Singapore, 2.0% Belgium, 1.9% India, 1.9% Taiwan, 1.7%

South Korea, 3.3% Netherlands, 2.9% Brazil, 2.4% Hong Kong, 2.3% France, 2.2%

China, 7.6%

Japan, 4.4% United Kingdom, 4.0%

Germany, 3.5%

Source: China Statistics Bureau, U.S. Census Bureau, Cushman & Wakefield Research

54 THE EDGE