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Idea
Catalyst
Research
Demystifying: US China Trade War
The Seen and Unseen
by Ripudaman Singh
August 2019
Agenda
Points
What is trade and tariff
What is the recent conflict
Seen and Unseen
What’s the Impact
Yet to come
International Trade &
Tariff
Trade ?
International trade is the exchange of capital,
goods, and services across international
borders or territories
Why Trade ?
A country that is relatively labour (capital)
abundant should specialize in production and
export of that product which is relatively labour
(capital) intensive
Tariff ?
Tariff is a tax to be paid on a particular class of imports or exports
US trade deficit
Total US Imports Total US Exports
$ 3.1 trillion $ 2.5 trillion
Total Imports from China
$ 539.6 billion $ 120 billion
Total exports to China
US China Trade Deficit
$ 419.5 billion
For FY 2018, 67% of US trade deficit is a result of trade imbalance with China
The Seen
and the
Unseen
Seen
• US domestic politics
• Bring back manufacturing jobs
to US
• Improve the trade deficit with
China
• Get US out of the debt
• “Trump is a Bully”
Un seen
Made in
China
Vision is
the key
trigger
point
Made in China Vision
• Global economic dominance by
2025
• Subsidies worth $ 300 billion
• Government promoting
companies to acquire
companies globally (Chinese
acquisitions in US at $45 billion)
• State backed companies
investing globally
• Technology Transfer agreements
Implemented policies to appropriate
technology from foreign
multinationals
Stipulated a high degree of local
content in equipment produced and
sold in the country
Force the transfer of proprietary
technologies from foreign companies
to their joint ventures with China’s
state-owned enterprises
Reverse engineering of number of
global products and technologies
Since 2006, Chinese government has
Circle of influence
• China has been expanding its economic,
political and military circle of influence in
its bid for global domination
• South China sea issues
• A stronger China means move toward a
bipolar world
• Shift of manufacturing from China to
other economies like Vietnam, Cambodia,
Thailand, Bangladesh and India, works in
favour of US
What’s the impact: America
Agriculture relies heavily on
commodity exports to
China
Small businesses and
traders are impacted with
higher tarriefs
Companies selling
unbranded/inhouse brand
products will have
challenges
Consumer is the biggest
looser
What’s the impact: EU Zone
BETTER
OPPORTUNITY
FOR EXPORTS FOR
EU COUNTRIES
CHINESE
COMPANIES
MIGHT START
DUMPING EXCESS
CAPACITY AND
PRODUCTION
EU COMPANIES
NEED TO BROAD
BASE THE
SOURCING TO
COUNTRIES LIKE
BANGLADESH,
VIETNAM ETC
ESPECIALLY FOR
GARMENTS AND
LOW-END
MANUFACTURING
CHINESE BACKED
COMPANIES
MIGHT BE
LOOKING TO
RAMP
ACQUISITION OF
TECH FROM EU
POTENTIAL FOR
BETTER
SOURCING TERMS
Yet to come
Increased
uncertainty
and volatility
in the stock
markets
Raising capital
to become
more difficult
(capital
markets)
Increasing
concerns
about the
growth
slowdown and
recession
Higher US
trade deficit
Problems of
the Euro zone
might increase
as it is already
dealing with
weak recovery
in many
countries
Yet to come
Potential
lower
consumer
demand in
American and
EU market
Emergence of
new bright
spots like
Vietnam,
Bangladesh
and Cambodia
Increased
capital flight
from China
Huge potential
in industrial
automation
Potential in
new digital
areas like 5G,
Robotics, IOT
etc focussed
on industrial
performance
improvement
Contact
Ripudaman Singh
+46-7675405057
ripudaman.ubs@gmail.com
twitter: rdsingh80

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Demystifying trade war

  • 1. Idea Catalyst Research Demystifying: US China Trade War The Seen and Unseen by Ripudaman Singh August 2019
  • 2. Agenda Points What is trade and tariff What is the recent conflict Seen and Unseen What’s the Impact Yet to come
  • 3. International Trade & Tariff Trade ? International trade is the exchange of capital, goods, and services across international borders or territories Why Trade ? A country that is relatively labour (capital) abundant should specialize in production and export of that product which is relatively labour (capital) intensive Tariff ? Tariff is a tax to be paid on a particular class of imports or exports
  • 4. US trade deficit Total US Imports Total US Exports $ 3.1 trillion $ 2.5 trillion Total Imports from China $ 539.6 billion $ 120 billion Total exports to China US China Trade Deficit $ 419.5 billion For FY 2018, 67% of US trade deficit is a result of trade imbalance with China
  • 5.
  • 6.
  • 8. Seen • US domestic politics • Bring back manufacturing jobs to US • Improve the trade deficit with China • Get US out of the debt • “Trump is a Bully”
  • 9. Un seen Made in China Vision is the key trigger point
  • 10. Made in China Vision • Global economic dominance by 2025 • Subsidies worth $ 300 billion • Government promoting companies to acquire companies globally (Chinese acquisitions in US at $45 billion) • State backed companies investing globally • Technology Transfer agreements
  • 11. Implemented policies to appropriate technology from foreign multinationals Stipulated a high degree of local content in equipment produced and sold in the country Force the transfer of proprietary technologies from foreign companies to their joint ventures with China’s state-owned enterprises Reverse engineering of number of global products and technologies Since 2006, Chinese government has
  • 12.
  • 13.
  • 14. Circle of influence • China has been expanding its economic, political and military circle of influence in its bid for global domination • South China sea issues • A stronger China means move toward a bipolar world • Shift of manufacturing from China to other economies like Vietnam, Cambodia, Thailand, Bangladesh and India, works in favour of US
  • 15. What’s the impact: America Agriculture relies heavily on commodity exports to China Small businesses and traders are impacted with higher tarriefs Companies selling unbranded/inhouse brand products will have challenges Consumer is the biggest looser
  • 16. What’s the impact: EU Zone BETTER OPPORTUNITY FOR EXPORTS FOR EU COUNTRIES CHINESE COMPANIES MIGHT START DUMPING EXCESS CAPACITY AND PRODUCTION EU COMPANIES NEED TO BROAD BASE THE SOURCING TO COUNTRIES LIKE BANGLADESH, VIETNAM ETC ESPECIALLY FOR GARMENTS AND LOW-END MANUFACTURING CHINESE BACKED COMPANIES MIGHT BE LOOKING TO RAMP ACQUISITION OF TECH FROM EU POTENTIAL FOR BETTER SOURCING TERMS
  • 17. Yet to come Increased uncertainty and volatility in the stock markets Raising capital to become more difficult (capital markets) Increasing concerns about the growth slowdown and recession Higher US trade deficit Problems of the Euro zone might increase as it is already dealing with weak recovery in many countries
  • 18. Yet to come Potential lower consumer demand in American and EU market Emergence of new bright spots like Vietnam, Bangladesh and Cambodia Increased capital flight from China Huge potential in industrial automation Potential in new digital areas like 5G, Robotics, IOT etc focussed on industrial performance improvement