Strategies & Analysis
largely interpreted by most experts as a
semi-veiled threat against North Korea’s
main trading partner, China. Although
those same experts feel that this threat
from Trump is not a credible threat given that such an action would have severe
negative effects on the U.S. economy,
something that Trump doesn’t want to
happen. However, what if such an action was taken, exactly how would it
impact on both sides, based on actual
2016 data. Using CEIC and U.S. Census
Bureau data the following (Fig 2 & 3)
provides a snapshot of both sides.
It is noteworthy to point out that based
on the 2016 data that the U.S. recorded a
large trade deficit in those sectors where
China exported the most goods. As such,
it is likely that those export items which
contributed to the deficit are the most
vulnerable to any potential U.S. trade ac-
tion. Trade analyst suggest that other po-
tential targets would include solar panels,
steel and aluminum.
The following chart (Fig. 4) highlights
the U.S. trade imbalances with China by
product in the 12-month period leading
up to June 2017.
So, what does this have to do with the
Chinese coating industry you might be
wondering. China exports huge amounts
of labor intensive goods to the U.S., in-
cluding toys, furniture, clothing and
footwear, while electronics and high-tech
products such as computers and mobile
phones are also among the top ten most
exported items. If you look at the top 10
or 12 exports from China, they all have
one thing in common, they are all coated
items and if trade is cut or decreased be-
tween China and the U.S. these products
won’t be produced or coated which will
result in an overall decrease in coatings
used in the Chinese market.
The bottom line for this North
Korean standoff is that neither China
nor the U.S. want to escalate a conflict
with North Korea. Neither party wishes
to engage in an outright trade war in
which both sides lose. The only power
that seems to have any influence over
Kim Jong-un is China who so far appears reluctant to exercise that influence.
Instead, Xi keeps pushing for restraint
by the U.S. in this matter, urging Trump
to return to the negotiating table.
The North Korea issue is a serious
problem for both Xi and Trump. One
that will impact on the upcoming CPC
19th party congress in China and on the
upcoming 2018 mid-term elections in
the U.S. Following the latest explosion
of a hydrogen bomb by Jong-un, global
markets were shaken with most of them
showing a decline. If this unrest continues
no doubt we will be seeing deteriorating market conditions in China, the U.S.
and other global markets. This potential
decline combined with the obvious slowdown of the Chinese economy points to
a potential decrease in Chinese coating
consumption over the next few years.
Given the fact that there are more than
8,000 coating producers in China, such a
decline in consumption will bring about a
much-needed consolidation of this industry. The Chinese government has decreed
that they will deal a heavy hand in combating over capacity and non-sustainable
businesses. The Chinese coating industry
is well positioned for such an undertaking. If there is a consolidation within the
Chinese coating industry this will be a
win/win for producers and customers.
Such a consolidation should give rise to