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Chinese Companies Relocate to Dodge Trump’s Tariffs

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  • Chinese Companies Relocate to Dodge Trump’s Tariffs

A growing number of Chinese companies are adopting a crafty way to evade US President Donald Trump’s tariffs: remove the “Made in China” label by shifting production to countries such as Vietnam, Serbia and Mexico.

The world’s two largest economies have been locked in a months-long trade fight after Trump imposed 25 percent customs duties on $50 billion worth of Chinese goods this summer, triggering a swift tit-for-tat response from Beijing.

Chinese factories making everything from bikes to tyres, plastics and textiles are moving assembly lines abroad to skirt higher customs taxes on their exports to the United States and elsewhere, according to public filings.

Hl Corp, a Shenzhen-listed bike parts maker, made clear to investors last month that tariffs were in mind when it decided to move production to Vietnam.

The factory will “reduce and evade” the impact of tariffs, management wrote, noting Trump hit e-bikes in August, with new border taxes planned for bicycles and their parts.

Trump warned last week those tariffs — targeting $200 billion in Chinese imports — could come “very soon”.

“It’s inevitable that the new duties will lead companies to review their supply chains globally — overnight they will become 25 percent less competitive than they were,” said Christopher Rogers, a supply chain expert at trade data firm Panjiva.

Supply chains have already begun relocating out of China in recent years as its rising labour and environmental protection costs have made the country less attractive.

Tariffs are adding fuel to the fire, experts and companies say.

“China-US trade frictions are accelerating the trend of the global value chain changing shape,” said Cui Fan, research director at the China Society of WTO Studies, a think tank affiliated with the commerce ministry.

“The shifting abroad of labour-intensive assembly could bring unemployment problems and this needs to be closely watched,” Cui said, adding the shift would not help the US’s overall trade deficit.

The growing list of foreign firms moving supply chains away from China — toy company Hasbro, camera maker Olympus, shoe brands Deckers and Steve Madden, among many others — already has Beijing worried.

Less discussed are the Chinese factories doing the same.

Zhejiang Hailide New Material ships much of its industrial yarns, tyre cord fabric, and printing materials from its plant in eastern Zhejiang province to the US and other countries.

Trump’s first wave of tariffs on $50 billion in goods this summer hit some of its exports; the next round of $200 billion looks like it will hit several more.

“Currently all of our company’s production is in China. To better evade the risks of anti-dumping cases and tariff hikes, our company has after lengthy investigation decided to set up a factory in Vietnam,” executives told investors last month.

“We hope to speed up its construction, and hope in the future it can handle production for the American market,” a company vice president said of the $155 million investment that will ramp up production by 50 percent.

Other moves abroad spurred on by tariff risks include a garment maker going to Myanmar, a mattress company opening a plant in Thailand and an electronic motor producer acquiring a Mexico-based factory, according to public filings from the firms.

Linglong Tyre is relying mostly on low cost credit to build a $994 million plant in Serbia.

The entire tyre industry faces a “grim trade friction situation”, Linglong told investors last month, citing “one after another” anti-dumping cases against China.

“Building a factory abroad allows ‘indirect growth,’ by evading international trade barriers.”

China’s bike industry faces a similar pivotal moment. The centre of manufacturing will shift away from China in the future, bike part maker H1 Corp told investors when announcing its Vietnam factory.

Some of Hl’s customers started moving production — especially of e-bikes — to Vietnam, said Alex Lee, in charge of global sales at Hl Corp.

“First of all there is no anti-dumping tax on Vietnam,” Lee said, adding labour costs were lower there as well.

China’s growing e-bike industry faces duties not only from the US but also the European Union, which slapped provisional anti-dumping tariffs of 22 to 84 percent on Chinese-made e-bikes in July, alleging Chinese companies benefited from cut-rate aluminium and other state subsidies.

The state support Chinese companies receive is key to the Trump administration’s case in taxing Chinese goods, but Hl shows how companies may continue to benefit even after shifting some of their production overseas.

Government subsidies, including millions of yuan to “enhance company competitiveness”, eclipsed H1’s profit during the first six months of the year, its filings show.

Still the company went ahead and bought an operating factory in Vietnam.

Lee noted they had transferred mass production of aluminium forks and steering parts to the new plant from their factory in Tianjin.

He did not know if it would lead to job cuts in China.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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