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Brazilian cotton emerges as final winner in trade war
Brazil's cotton imports surge once China imposes a 25% tariff on U.S. cotton imports and trade flows to Brazil, India and Australia, U.S. cotton imports will drop significantly in China's share of cotton imports. In 2017/18, China imported 1.37 million tons of cotton, of which US cotton imported 540,000 tons, accounting for 39% of total imports; Australia imported 340,000 tons, accounting for 25% of total imports; India imported 165,000 tons, accounting for total imports. 12% of imports; Brazil imports 88,000 tons, accounting for 6% of total imports. Brazilian cotton is replacing US cotton as the largest country in China's cotton imports. Affected by the trade war, the US cotton import share fell rapidly from 39% in 2017/18 to 13%, while Brazil's share rose sharply from 6% to 33%. U.S. cotton exports expand to Southeast Asia At present, the main exporters of U.S. cotton are Vietnam, China, Indonesia and Turkey, with export shares of 23.83%, 16.24%, 8.52% and 7.99% respectively, of which Vietnam is the largest export market for U.S. cotton. Due to the trade war, the number of contracts signed by China has been greatly reduced recently, and the contract has been broken. It is expected that the export of US cotton will continue to shift to Vietnam, Turkey, Pakistan and Indonesia. The impact of the trade war on the textile and apparel industry my country is the world's largest producer and exporter of textiles and apparel. According to customs statistics, in 2018, the total export value of my country's textiles and clothing was 276.731 billion US dollars, of which the cumulative export value of textiles was 119.098 billion US dollars, and the cumulative export value of clothing was 157.633 billion US dollars. From January to April 2019, the total export value of my country's textile and clothing was 75.764 billion US dollars, a year-on-year decrease of 3.86%. Among them, the export value of textiles was 36.672 billion US dollars, a year-on-year increase of 0.91%; the clothing export value was 39.092 billion US dollars, a year-on-year decrease of 8.63%. If the trade war continues to escalate, it will have a direct impact on my country's textile and apparel exports. my country's textile and apparel exporters mainly include the European Union, the United States, Japan, Vietnam, etc. Among them, the United States is China's largest exporter of textiles and apparel, accounting for 17.2% of my country's total textile and apparel exports in 2018. The US$200 billion export tax increase has little impact. The US$200 billion involves cotton, knitted crochet fabrics, hats, leather products, etc. The products involved in the list exported a total of US$9 billion to the United States in 2018, accounting for 21.2% of China's exports of textiles and clothing to the United States. %, accounting for 3.3% of China's total textile and apparel exports. Therefore, the United States has imposed a 25% tax increase on China's 200 billion US dollars of exports, which has little impact on the domestic textile industry, and the impact on cotton demand is about 100,000 tons. The impact of the 300 billion US dollar export tax hike will increase. If the 300 billion US dollar Chinese exports are taxed, it will cover all textiles and clothing exported to the United States, with a total of 47.6 billion US dollars, accounting for 17% of China's total textile and clothing exports. The demand impact is about 1 million tons, accounting for about 11.7% of my country's cotton consumption. Therefore, if tariffs are imposed on 300 billion US dollars of export commodities, downstream demand for textiles will continue to weaken. Southeast Asian countries will gradually replace China's share of U.S. textile and apparel supply once tariffs are imposed on $300 billion of Chinese exports. For the United States, China is the largest supplier of textiles and apparel to the United States, accounting for 50% of the US textile and apparel imports and 30% of cotton textiles and apparel. The main importing countries of American cotton textiles include India, Pakistan, Vietnam, etc. The Sino-US trade war has given Southeast Asian countries a greater competitive advantage in the export of textile industries. Summary and Outlook The impact of the trade war includes changes in the trade flow of raw materials and downstream textile and apparel. For China, Brazil will squeeze the import share of U.S. cotton and become my country's main cotton supplier; as China's demand decreases, U.S. cotton exports will expand to Southeast Asian countries. The increase in tariffs of 200 billion yuan has little impact on domestic cotton, while the tariffs of 300 billion yuan involving all textiles and clothing have a greater impact on domestic textile downstream, and the impact on domestic cotton demand is about 1 million tons. Under the influence of the trade war, Brazil's cotton exports are relatively good, and cotton production is expected to maintain a substantial growth in the later period. However, US cotton exports will remain weak. Under the expectation of a 20% increase in US cotton production in 2019/20, the pressure on later sales will be aggravated. my country's cotton demand side will continue to weaken, while the Southeast Asian textile industry will have greater competitiveness. 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