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Insight | Time:Jun 25 2018 4:28PM
How will additional tariff influence cotton linter import from US?
 
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The US announced to impose 25 percent tariffs on $50 billion worth of imports from China on Jun 15. Following that announcement, China said it would protect its own interests and levy 25% tariffs on about $50 billion worth of US imports covering 659 goods, including cotton linter and cotton (not carded or combed), taking effect since Jul 6, 2018. What about status quo of cotton linter import from US and how about the tendency?



China imported cotton linter from 19 countries (regions) in 2017 and US was the major origin. According to customs data, US tanked the third place as China imported 10,240.4 tons of cotton linter from US in 2017, taking up 10.1% of total. Given cotton waste import ban taking effect since Jan 1st, 2018, the import from India and Central Asia reduced sharply and that from US occupied much higher proportion. In Mar, China imported 793.535 tons of cotton linter from US, taking up 22% of total. In the first quarter of 2018, US ranked the second place as the export to China amounted to 2,027.3 tons, taking up 22.6% of China's total import.



US cotton linter enjoys good reputation by virtue of high quality, which has been favored by specialty pulp and refined cotton producers and the unit price has been much higher than the average import price. In 2017, China's cotton linter import price was $602/mt in average while the price of US cotton linter was $851/mt. In the first quarter of 2018, the average import price was $591.65/mt while US linter was around $863.18/mt. US linter price was more than 45% higher than the average price in the same period.

China has no big advantage of cotton linter import. US cotton linter cost will increase substantially after being levied by additional tariff of 25%, so the import from US may be affected. The policy will take effect starting Jul 6, covering linters with contracts being signed and the ones in bonded warehouse. If cargoes fail to be loaded before Jul 6 and prices are not accepted after adding tariff, the possibility of breaking contracts may increase significantly.

To medium and long term, Sino-US trade fraction may not be controlled by trade agreement for once or twice. At least during the Trump administration, US is likely to keep raising prices and trade fraction may last a long time. However, there are also uncertainties of turning risks into opportunities.
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