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Saturday, November 17, 2018

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International News : China-U.S. trade dispute sparks uncertainty

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China-U.S. trade dispute sparks uncertainty

China-U.S. trade dispute sparks uncertainty


The market uncertainty being caused by the China-U.S. trade dispute is now one of the most important topics to watch, even amid myriad changing developments and issues that continue to impact market dynamics worldwide. The first volley was made by the U.S., and then (on August 23) China retaliated with a 25% import tariff on U.S. SYP logs.

Following that, on September 17, the U.S. announced 10% tariffs on $200 billion worth of Chinese imports (effective September 24). The next day (September 18), China announced 5%-10% tariffs on $60 billion of U.S. goods (also effective September 24). Most of the timber and wood products exported from the U.S. to China are included on the list of items affected.

Southern yellow pine log shipments from the U.S. South had been slowing before the implementation of the 25% tariff, impacted by China Customs' decision in April to increase phytosanitary inspections and begin full enforcement of documentation requirements on incoming log shipments; as a result, the July trade data revealed a drop in SYP log exports of 25% from April. In addition, the CFR price of SYP logs being offered by U.S. suppliers has seen large declines in the last several months versus other species.

While the U.S. represented only a modest share of China's total log and lumber imports in H1/2018 (13% of softwood logs, 2% of softwood lumber, 7% of hardwood logs, and 21% of hardwood lumber), fully 54% of U.S. log exports and 38% of lumber exports went to China in 2017. Clearly, the U.S. export industry relies heavily on the China market.

China's predominant wood products exports to all markets are wood furniture and seating products (63%), followed by plywood (14%). Of China's timber and wood products exports to the U.S. in 2017, US$12.9 billion (35.7% of the total) went to the U.S., led by wood furniture and seating (US$9.28 billion). Overall, the U.S. represented 41% of China's wood furniture export value last year.

There is little doubt that both countries will be impaired by this tariff war, with both ultimately losing competitiveness in each other's markets.

Source: International Forest Industries

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