Starting in 2018, with the intensification of trade friction between China and the United States, the foreign trade exports of textile companies have been greatly affected. The recent resurgence of calls in the United States to reduce or reduce tariffs on China can be regarded as a rare benefit to textile people during this period.
Of course, the desire to cancel the additional tariffs does not mean that the United States suddenly wants to ease relations with China. What is more important is that after the epidemic, major economies around the world began to experience inflation.
The U.S.-China Business Council issued a statement on the 27th saying that the imposition of additional tariffs on goods imported from China is an unnecessary tax on American consumers and businesses. Removing the additional tariffs will reduce the price of consumer goods. In the context of high inflation, This can save each family hundreds of dollars each year.
In other words, even if taxes are increased, American consumers are still inseparable from Chinese goods. The increased tariffs will eventually be borne by the American people, which will further exacerbate inflation.
But the problem is that perhaps when the United States just started to increase taxes in 2018, the tariff issue was still the main contradiction for textile people when doing foreign trade. But since the global pandemic of the new coronavirus in 2020, the tariff issue has become a secondary contradiction. The main contradiction Contradictions have turned into a series of sequelae caused by the epidemic.
Everything is rising, only the profits of textile companies are shrinking
To give a rough analogy, before the trade friction in 2018, if a cloth boss sold cloth for 100 yuan, the production cost might be 70 yuan. Adding tariffs, freight and a series of transaction processes in the middle, American consumers could accept 200 yuan. I can buy these for 30 yuan, leaving a profit of 30 yuan for domestic textile people.
After the tariffs are imposed, the cost will remain the same before the epidemic, but a tax of 30 yuan will be added. However, American consumers may only accept a price of 210 yuan at most, and the freight and intermediate channel prices cannot be negotiated. In the end, the textile people’s asking price It may only be 85 yuan, the profit is only half of the original, and the price of 200 yuan has increased to 210 yuan, and American consumers’ willingness to buy has also declined.
After the epidemic, under the background of inflation, the cost of raw materials continued to rise, and the production cost rose to 80 yuan. It was no longer possible to make much money selling cloth. The cost of intermediate circulation links such as freight prices was still rising. American consumers The original price of buying these things may have become 240 yuan.
(According to microeconomic theory, for general consumer goods, sales volume and price are inversely proportional, that is, the higher the price, the lower the sales volume)
If the additional tariffs are cancelled, it will be equivalent to adding back the 30 yuan profit margin that was originally removed in the industrial chain. This is indeed good news for textile companies, but how much of this piece of meat can the cloth boss get?
U.S. tax cuts only to reduce inflation
As mentioned at the beginning of the article, the reason why the United States has relaxed its tariffs this time is not that the relationship between China and the United States has greatly eased. On the contrary, due to the war between Russia and Ukraine, the recent global The geopolitical situation has become increasingly tense. It is only because of inflation that the prices of the American people have risen too much, so they want to slow down the price rise by subtracting this part of the tariff. In other words, according to the above example, minus the 30 yuan tax, the best result for the United States is that other circulation links remain unchanged, and the price for consumers to buy things is reduced from 240 yuan to 210 yuan.
Of course, although the United States thinks so, in practice this situation is almost impossible to happen. At this time, the bargaining power of domestic textile companies will be tested.
Textile companies have weak bargaining power
Judging from the actual situation, the bargaining power of domestic textile companies is very unoptimistic. After the trade friction in 2018, the editor also interviewed many cloth bosses engaged in foreign trade. Whether the exported products are popular or unsalable, the reduction in unit product profits after the imposition of tariffs is very obvious. The reasons mentioned by the bosses are also very consistent. Traders lower prices. If they don’t do it themselves, other companies will do it. As the market shrank after the epidemic, this situation became even more obvious.
In fact, not only the textile industry, but almost all manufacturing industries are facing this dilemma. Due to the rapid growth in production capacity during the previous few years when the global economy was operating well, the textile industry has experienced a serious oversupply phenomenon at this stage.
Demand may pick up, but profits will be difficult to increase
In the short term, the elimination of additional tariffs will allow the United States to�The reduction in consumer purchase costs may bring about a slight recovery in demand, which will be reflected in the textile market, that is, the number of foreign trade orders may increase. In terms of profits, the amount of profit space that can be obtained through the reduction or exemption of tariffs depends on the bargaining power of textile companies. But no matter what, the situation is so difficult now, it would be better to make a little more profit.
In the long run, outside the low-end textile industry, there are rapid developments in countries such as Vietnam and Myanmar, and internally there is the involution of the huge domestic industrial scale, making it difficult to increase bargaining power. In the context of inflation, all costs are rising. Only the price of finished textile products cannot rise. After all, the dilemma of cloth bosses cannot be truly solved.
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