Analysis of the Impact of the Sino US Trade War on the Non ferrous Metals Industry

Due to a series of factors such as the continuous expansion of the US trade deficit, the approaching midterm elections and Trump's record low support rate, and concerns about China's rise, the US has recently planned to impose large-scale tariffs on goods imported from China and restrict Chinese companies from investing and acquiring in the US, which has the potential to provoke a trade war.
Chinese industries that may be affected by trade wars
On March 23rd, Trump signed a memorandum of understanding on Chinese trade, which will impose large-scale tariffs on imported goods from China, involving a total of 60 billion US dollars in Chinese goods.
From the signing of the memorandum, the industries that are most affected are those that plan to impose a 25% additional tariff on China, especially in the fields of aerospace, information and communication technology, and machinery; In addition, industries with a relatively large proportion of Chinese exports to the United States may also be affected, such as home appliances and electronics accounting for 48% of total exports, miscellaneous products accounting for 12%, textiles accounting for 10%, and metal products accounting for 7%.
As a counterattack, the Chinese Ministry of Commerce issued a positive response statement and on the 23rd released a list of products that have been suspended and reduced in compliance with the 232 measures for imported steel and aluminum products from the United States, seeking public opinion and proposing to impose tariffs on some products imported from the United States.
In 2017, the top five categories of products with the highest export value from China to the United States were electromechanical, audio-visual equipment and its parts and accessories, miscellaneous products, textile raw materials and textile products, base metals and their products, vehicles, aircraft, ships, and transportation equipment. These five categories accounted for approximately 77.5% of China's total exports to the United States, with the top ten categories accounting for 93%.
In 2017, the top five categories of products with the highest export value from the United States to China were electromechanical, audio-visual equipment and its parts and accessories, vehicles, aircraft, ships and transportation equipment, plant products, products from the chemical industry and related industries, optical, medical and other instruments, watches, and musical instruments. These top five categories accounted for about 70% of the total export value of the United States to China.
Under Trump's current policies, China's high-tech products, including electromechanical, communication, and information technology products, will face serious impacts. The impacts in areas such as aerospace equipment, biopharmaceutical and medical equipment, agricultural machinery equipment, high-speed rail equipment, and new generation information technology in the Made in China 2020 strategy will be very significant.
The potential impact of a trade war
The author believes that the possibility of a comprehensive trade war is relatively small. In the history of the United States, there have also been cases where customs duty protection or steel industry protection has been adopted, but the results are usually not ideal. One of the reasons for Trump's current tariff policy is that, in order to win votes in the midterm elections, if the trade war affects economic conditions such as employment in the United States, it will be even more detrimental to Trump's future elections. On the Chinese side, the contribution of exports to China's economic growth is extraordinary, and China does not want to engage in a trade war. A large-scale trade war will only bring a win-win outcome, so from the perspective of both parties' interests, the possibility of a large-scale trade war is unlikely.
In the short term, China's manufacturing industry may be impacted. From the perspective of the structure of China's exports to the United States, the proportion of mechanical and electrical, audio and video equipment exports is the largest, followed by textiles, base metals (including steel, aluminum, etc.), transportation equipment, plastics, and rubber products. Therefore, we expect that the export of China's manufacturing industry will be hindered in the short term, which may affect the production and operation of China's manufacturing industry.
The rise of China has put pressure on the United States, and this trade war is similar to the sanctions imposed by the United States on Japan back then. Therefore, we need to be vigilant about the long-term considerations behind the US trade protection. The current dominant position of the US dollar has been weakened, and China is its strong opponent. The Trump administration may force the RMB to appreciate in order to maintain the global position of the US dollar.