As for the impact of tariff reduction, we have conducted continuous follow-up research since the fourth quarter of last year. At present, if the Biden government further reduces tariffs on China, how to judge the benefit order of various industries? Superimposed on the recent trend of RMB devaluation, which direction deserves more attention?
Inflation remains high, so it is necessary and urgent for the Biden administration to reduce tariffs on China
\u3000\u30001. The latest data show that although the year-on-year growth rate of CPI has fallen from the historical peak of last month, the month on month growth rate of core CPI continues to expand, and the overall inflation level is higher than market expectations. Relevant research shows that reducing tariffs on China will be an important way to alleviate inflation in the United States and China. If the trade weighted average tariff is reduced by 2.5 percentage points, the inflation rate can be reduced by 1.3 percentage points.
\u3000\u30002. Last October, the United States planned to re exempt 549 tariffs on Chinese imports and consult the public on this. → the United States finally decided to re exempt the tariffs on "352" Chinese imported goods, which was implemented on March 23 this year. On May 10 this year, Biden once again proposed to consider abolishing the tariffs imposed on China during the trump period.
\u3000\u30003. We believe that at present, the commodities that have been subject to tariffs in the previous four rounds of trade wars and are not in the "352" exemption list will be the most likely objects to receive tariff exemption in the future.
\u3000\u30004. In terms of the tariff exemption rate of each category, it is in reverse order. The logic lies in: (1) the tariff increase in the early stage of the trade war (the first two times) is mainly to "restrain" the development of Chinese industry, and the tax objects are also high-end manufacturing industries such as general equipment, special machinery, components and power supply equipment, while this demand of the United States has not changed qualitatively at present; (2) In the later stage of the trade war (the last two times), the tariff increase was mainly to reduce China's exports to the United States and narrow the huge trade deficit. The tax increase commodities were also gradually inclined to light industry manufacturing, textile and clothing and other industries, without involving core technology and major national competitive strategies. These categories are the breakthrough points that help to solve the contradiction between rising prices in the United States and China, so they are most likely to be given priority.
If the tariffs imposed by each round of trade war are reduced or exempted, which industries will benefit? If the remaining tariff products in each round of trade war are exempted, the industries that will benefit are: (1) the first round: machinery, electronics, new electronics, automobile, etc. (2) The second round: electronics, machinery and basic chemical industry. (3) The third round: machinery, basic chemical industry, light industry manufacturing and automobile. (4) The fourth round: textile and garment, light industry manufacturing, machinery.
If the final "trade war" tariffs are exempted, which industries will benefit? What's the order?
\u3000\u30001. From the perspective of primary industry: excluding the products in the "352" list, the commodities still subject to additional tariffs are mainly distributed in machinery, textile and garment, light industry manufacturing, basic chemical industry, electronics, new electricity, household appliances and automobile industries. At present, there is still a large space for tariff reduction.
\u3000\u30002. From the perspective of secondary industry: from the perspective of means of living, industries such as brand clothing, household goods, textile manufacturing products and white household appliances are expected to usher in tax reduction; From the perspective of production links, industries such as special machinery, metal products, general equipment and auto parts will usher in favorable conditions.
\u3000\u30003. According to the law of "reverse order" reduction and exemption, logically, the order of benefits of various industries will be: brand clothing, furniture, textile manufacturing, metal products → machinery and auto parts → basic chemical industry, new electricity and electronics.
\u3000\u30004. If we assume that the RMB is still in a weak range in the future, we will superimpose this paper with the logic and conclusions in the report of the impact and transmission logic of exchange rate on A-Shares (20220425), and we will get an industry portfolio that may be relatively dominant in the future: the benefits of power equipment, machinery and household appliances industries are deterministic and early, The basic chemical and electronic industries are likely to benefit, but they will lag behind.
Risk tip: the easing of Sino US trade relations is less than expected; The scope of final tariff exemption goods is less than expected.
