The trade dispute between the US and China seems to be contributing to a slowdown in the Chinese economy and a dip in Chinese consumer confidence. The Chinese Government has responded to this slow-down in the Chinese economy by loosening monetary policy. It has also orchestrated a sharp devaluation of the Chinese currency, the Renminbi, against the US$. This will make Chinese esports more competitive, particularly in the US even with the new 25% duty on some products. However, no wool clothing products that have yet been included in these higher tariffs. The US is important to China’s exports of wool clothing (accounting for 14% share of China’s exports) but China is vital to US imports of wool clothing.
China is the largest supplier to the US of wool clothing, accounting for 52% of US imports of wool clothing (by volume) and 43% of US imports by value. China’s importance for the US’ imports of clothing isn’t restricted to wool. China accounts for a similar share of the US imports of synthetic fibre clothing, with a 51% share by volume and a 38% share by value. China has a large but relatively smaller share of US imports of cotton clothing, at 29% in volume terms and 26% in value terms.
If the US imposes a 25% duty on imports of wool clothing from China, that will flow-on back to Australian wool growers given that Australia supplies around half of China’s raw wool requirements. Of course, as China has a 75% share of Australia’s exports, any reduction in China’s demand will hurt in the Australian wool market.
Further details including a chart showing the trends in the Chinese currency against the US$ and the A$, and another chart showing the trends in the US imports of wool clothing both in total and from China is shown in the full edition of this week’s edition of the Weekly Newsletter, available to NCWSBA members.