Analysis of the impact of Sino-US trade war on China's lighting industry

First, the background

 

China and the United States are each other's largest trading partners, and Sino-US trade disputes are an important issue in Sino-US economic relations. Sino-US trade disputes mainly occur in two aspects: one is China's export sector with comparative advantages (such as the use of 301 survey); the other is China's lack of superior import and technical knowledge areas (for example, using the 337 survey). The former is basically competitive, while the latter is not fully functioning in the market. They have different effects on the economic welfare and long-term development of the two countries.

 

Since Donald Trump took office, the United States has pursued various political and economic strategies of the United States, adopted unilateralism and trade protectionism measures, and continually provoked trade wars, resulting in escalating trade frictions and disputes between China and the United States. The situation can be described as "black cloud pressure city to destroy, Jiaguang to the Japanese gold scale."

 

1. The US action

 

On March 23, the United States took the lead in provoking a trade war and announced that it would impose tariffs on Chinese exports from the United States based on the 301 trade survey initiated against China and restrict Chinese companies from investing in the United States.

 

On May 30, the United States announced that it will impose a 25% tariff on goods valued at 50 billion U.S. dollars imported from China;

 

On June 15th, the United States issued a list of tariffed goods, which will impose a 25% tariff on about 50 billion US dollars of goods imported from China, including about 340 million US dollars in 818 categories since July 6. The tariff was levied, and at the same time, about $16 billion worth of goods were imposed on tariffs and public comment was sought.

 

On July 10, the United States announced a list of products recommended for 10 billion tariffs on US$200 billion in Chinese exports to the United States;

 

On August 2, the United States plans to increase the tariff increase of 200 billion US dollars to China's exports to the United States to 25%.

 

On August 8, the United States announced a list of 279 categories of Chinese products worth about US$16 billion, which were officially implemented on August 23. The list includes semiconductors and related products (including LEDs). The 85414020 where the packaged device is located and the 85419000 where the LED chip is located).

 

On September 17, the US government's measures to impose a 10% tariff on China's 200 billion US dollars in US exports were finalized. The measure will be implemented on September 24, and by January 1, 2019, the relevant product tax rate will be Upgrade to 25%. The US also warned that if the Chinese take revenge measures, the US will impose tariffs on another US$2,670 US export to the United States.

 

2. Chinese response

 

On June 16, with the approval of the State Council, the State Council Tariff Commission decided to impose a 25% tariff on imports of approximately US$50 billion from the United States, of which 545 items of approximately US$34 billion were imposed on tariffs from July 6. The implementation time for the tariffs on the remaining commodities will be announced separately.

 

On August 3, with the approval of the State Council, the State Council Customs Tariff Commission decided to impose tariffs of 25%, 20%, 10%, and 5% on 5,207 items of approximately 60 billion US dollars of goods originating in the United States. If the US side implements its second round of tariff-adding measures, China will implement the above-mentioned tariff increase measures.

 

On August 9, with the approval of the State Council, the State Council Tariff Commission decided to impose a 25% tariff on 333 items of approximately US$16 billion worth of imported goods originating in the United States. All types of motor vehicles and car products accounted for more than half of the entire list. . The decision was implemented in parallel with the US on August 23.

 

On September 18, according to the "People's Republic of China Foreign Trade Law", "People's Republic of China Import and Export Tariff Regulations" and other laws and regulations and the basic principles of international law, the State Council's Customs Tariff Commission decided to have a total of 5,207 tax items originating in the United States. About $60 billion worth of goods, plus 10% or 5% of tariffs, will be implemented from September 24. He also stressed that if the US insists on further increasing the tariff rate, China will respond accordingly.

 

Second, the tariff-related lighting industry related products

 

1. The first round of 50 billion US dollars

 

 

The first round of US-to-China tariffs on the US$50 billion product list is mainly related to the middle and upper reaches of the chip and packaged device products, while the export rate of Chinese manufacturers in this field is very small, and the sales to the US are even less, affecting limited.

2. The second round of 200 billion US dollars

 

 

 

Compared with the first round of the $50 billion product list, the US tariff list for US$200 million worth of tariff products has a much greater impact on China's lighting industry's exports to the US. In addition to incandescent light sources (HS code: 853922 and 853929, etc.) and LED replacement light sources (HS code: 85395000) and other products, this tariff list covers most of the lighting industry related products, compared to the previous The taxation list only reduced the number of 85041000 ballasts for discharge lamps or discharge tubes, the electrical lighting equipment for the 8511220 bicycles, and the visual signal devices for the 85112040 bicycles.

Third, the important position of the US market

 

 

 

As the number one market for China's lighting products export, the United States is unshakable. It ranks first in the export of all kinds of lighting products and has a small list. In 2017, China's exports to the United States totaled about 10.8 billion US dollars. It accounts for a quarter of the total export value of lighting products (the total export value of 41.2 billion US dollars), and plays a pivotal role in the foreign trade of lighting products in China. The list of tariffs involved in this tariff is about 8 billion US dollars, which accounts for about 75% of China's exports of lighting products to the United States, accounting for about 20% of China's total exports of lighting products.

 

The export of the lighting industry can be described as "the world of North America." China's top 20 lighting products export companies are supported by a huge number of US markets. Some of their businesses are OEMs for multinational companies such as PHILIPS, LEDVANCE and GE. Some are HomeDepot and Costco with strong channel capabilities. Large home furnishers such as Lowe's are super-branded; others are the path of importers. A considerable number of lighting export companies account for 60%-90% of their total exports, and some companies even exceed 95%.

Therefore, whether it is the export of the whole industry or the export of a single enterprise, the US market is undoubtedly the most important.

 

Fourth, the status quo of impact

 

1. Exchange rate impact

 

The Sino-US trade war has intensified, which has also led to a sharp depreciation of the renminbi. The exchange rate of the US dollar against the renminbi has plunged from below 6.3, which was the lowest at the beginning of this year, to nearly 7 today. Last year, the US dollar plummeted, causing export companies to sigh and sigh. This year, it was replaced by a distributor of domestic electronic device products. Although the depreciation of the renminbi offsets the impact of tariff increases on domestic export enterprises to some extent, whether it is a big rise or a big fall, abnormally volatile fluctuations in the short-term exchange rate will disrupt the market price system and affect the export performance of enterprises. And gross margin.

 

2. The export tax rebate rate for lighting products is raised

 

Recently, the Ministry of Finance announced that the export tax rebate rate for LED lighting (HS code 85395000) and lamps (HS code 9405 series) and other related lighting products has been raised from the original 13% to 16%. It can be said that this action partially offsets the increase. The negative impact of tariffs, but this is only a short-term positive.

 

3. The fourth quarter buffer period

 

Although the second round of implementation of the 10% tariff increase measures and the previously announced direct addition of 25% tariff measures is relatively mild, but the impact of China's overall export to the United States can not be ignored, 10% of the tariffs from the positive aspects In the acceptable range of the two sides, the exporter and the importer can share the same; from an unfavorable point of view, 10% of the two parties have a certain amount of discretionary space, which may also lead to more intense price and malicious competition.

 

Of course, if there is no progress in the trade negotiations between China and the United States, the increase in tariffs to 25% from January next year will be unbearable for both sides.

 

4, LED light source is temporarily flawless

 

In the current situation, the LED replacement light source product (HS code 85395000) was not included in the second round of the $200 million tariff list. In the past, LED lighting products were included in the tax code of HS code 94054090, which was newly established by the International Customs Organization (WCO) in 2017. In addition, the general tariff rate of light source products itself is lower than the general tax rate of lighting products. In the future, it is expected that more LED light source products that meet the requirements of this tax item will be transferred from 94054090 to 85395000, which can also be used as a reasonable tax avoidance method.

 

5, the price of US enterprises

 

Since May, the North American lighting manufacturers Acuity brands and Eaton (Cooper Lighting parent company) have announced the price increase. Since then, Venture Lighting, RAB Lighting, Ledvance's North American Sylvania and Panasonic's Global Matt ULT have raised their products. Prices, some of which have raised prices several times. The reason is not only that the rapid development of LED lighting has squeezed the living space of traditional lighting products, which has lost the economies of scale and the rising costs of raw materials, manpower and logistics. The most important thing is to deal with the impact of the US 301 investigation.

 

6. Actual impact on US exports

 

 

 

From the export situation of several major products of LED light source and lamps this year, first look at the ring ratio, the export situation that should be in the peak season is only better than the traditional low season of the industry in February, significantly lower than other months; several main types The year-on-year growth rate of products was also in double-digit negative growth, and the downward trend was obvious. It reflects the direct impact of the increase in tariffs imposed by the Sino-US trade war on the volume of export trade, and the author believes that this effect will be more obvious in the fourth quarter.

Compared with the situation in which US customers wait and see the atmosphere before the imposition of tariff measures, US customers will face many problems such as price negotiations, increase and decrease of inventory, and search for product replacement countries in the fourth quarter buffer period. Some US orders are diverted to India. Countries such as Mexico will be inevitable and will need to be paid attention by domestic export enterprises.

 

V. Analysis of lighting product manufacturing substitute countries

 

1. The production capacity of the United States itself

 

 

 

The United States itself has a good manufacturing base for lighting products. Under the background of the Trump administration's return to industrial manufacturing, the entire lighting industry will have a certain degree of development with its advanced equipment level and relatively complete industrial chain system.

However, the demand in the US market is too large, accounting for more than 20% of the global lighting market. Only relying on its own manufacturing capabilities can not meet the needs of the country. In particular, the light source products are basically imported from China, so the United States itself does not have comprehensive General lighting products are self-sufficient.

 

2. A lighting manufacturing powerhouse with a relatively complete industrial chain

 

Such countries are represented by Japan and Germany. Similar to the situation in the United States, the lighting manufacturing industry is relatively developed, and the whole industry chain can be described as perfect. It is known for its advanced equipment and exquisite manufacturing technology.

 

 

 

The main problems of these two countries are similar to those of the United States. Although the market demand is not as large as that of the United States, it is also among the best. Although the whole process of manufacturing lighting products has its own manufacturing capacity, it has not formed a scale effect and is trapped in labor, logistics and supply chain costs. The higher the limitation, the cost performance of lighting products, especially the light source products, still can't compete with China, so the country can't fully realize the self-sufficiency of general lighting consumer goods, and the public opinion is exported to other countries.

3. Countries with manufacturing capacity for lighting products

 

Such countries are represented by India, Vietnam, Indonesia, Mexico, Brazil and other countries, of which India is the most concerned.

 

 

Although India attaches great importance to the lighting industry, the government is also pushing for it and has a certain scale of lighting industry. But first of all, in terms of production capacity, India and China, which are known as the world's second largest lighting industry, are not at an order of magnitude.

Secondly, the whole industry chain supporting problem is the hard injury of the Indian lighting industry, and the formation of a comprehensive system is not a one-off process. This is also the root of SKD/CKD trade prevailing in semi-finished products and accessories between China and India.

 

In addition, India's overall manufacturing, warehousing, transportation, hydropower and other infrastructure facilities are even more inconsistent with China. For example, there is currently no high-speed rail in India. The national expressway is only a few hundred kilometers in length, which is China's thousandths. First, coupled with its relatively harsh business environment, low labor efficiency, poor safety and health conditions and other factors. As far as the lighting industry is concerned, “Made in India” wants to replace the status of “Made in China” and there will be a long and tortuous road to go.

 

 

 

Other countries also have common problems in the lighting industry chain, and each of them faces many problems such as unstable political and economic situation, low social efficiency, and lack of various resources. It is difficult to form a climate in the short term.

 

In summary, whether it is a developed economy such as the United States, Japan, and other industries that have the ability to manufacture the entire industrial chain, or an emerging economy such as India, the current production capacity cannot meet the diversified, rapidly developing, and high global market. The full range of price/performance needs. As a world factory for lighting products, China's products are exported to 220 countries and regions, and its market share in the global market has exceeded 50%. This achievement is not a day's work. The author believes that in the short-term 3-5 years, it is an “impossible task” to find a country that can meet the market demand and replace China's manufacturing status in terms of the quantity and cost performance of lighting products.

 

Sixth, China's lighting products export substitution market analysis

 

 

From the global LED lighting market map, China, the United States and Europe are the three major markets, the United States is the single largest export market; China's domestic market actually has a large space; the European market is large but a relatively scattered personality The market for differentiated demand; Asia-Pacific, Latin America and the Middle East are potential markets for rapid growth; while the Japanese market is developing faster due to LEDs, LED light sources are approaching saturation, and LED integrated lamps are in the ascendant.

 

 

According to the latest data of LED lighting products export destination countries in the first three quarters of 2018, the main export areas are still developed economies and emerging economies. In the developed economies, the traditional Americans are riding the world, and Canada, Australia, and Europe in North America (such as Germany, Britain, and France) are still in an important leading position. In emerging economies, the BRICS countries and the Russian market are the first to look at. Gradually warming up in the year of crisis three years ago, Brazil’s political turmoil