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What happens to cotton prices after tariffs

2019-02-25 17:32
In recent years, the increase of labor cost in China has squeezed the profits of China's cotton textile industry. Many enterprises choose to set up factories in southeast Asian countries, and the industry prosperity index declines. In particular, the industry prosperity index of the last four years of the production of grey cloth has declined significantly.
What happens to cotton prices after tariffs?
First, China's imposition of tariffs on us cotton will increase the cost of cotton imports.Although the amount of cotton imported by China is not large, but this year is a special case, the cotton inventory of China's state reserve has declined. Whether the country increases the import through releasing sliding reserve tax, or the state reserve directly increases the import, China's cotton demand will have a greater level than in previous years.And increasing imports of American cotton in China in recent years, mainly because the cotton price is higher, if American cotton import advantage no longer, China is likely to import Australian cotton, cotton and Australia listed later, is commonly 4 to 9 month, market supply and demand the mismatch of time, this will increase the demand for high quality cotton tensions in the second half of our country, so the second half of the domestic cotton prices are likely to be together with the global cotton prices.
Secondly, the us side imposed tariffs on Chinese textiles and clothing.From recent china-us relations, the probability of sino-us trade friendly consultations have not, find new trade channels to secure their economy of China and the United States, for the United States, to China after the tariffs, importing can be transferred to southeast Asia, but for China's cotton textile industry, 300 billion yuan trade in the future even greater loss of trade market of domestic textile industry, it will be reversed transmission domestic textile enterprises foreign investment speed, reduce the demand for cotton.
Finally, the transmission process of cotton price.From the perspective of fundamentals, even if China and the United States impose tariffs on each other, the cotton planting area of China and the United States has become a forcertain, which has little influence on the current fundamentals of the cotton market. In the second half of the year, the global cotton market is still tight in supply and demand, and the price will tend to rise in the case of mutual tariffs.With the increase of cotton price, China's demand for cotton weakens, the demand for cotton turns to the demand for cotton yarn import, yarn import will increase, and if the foreign investment of cotton textile industry accelerates, the demand for cotton will further squeeze, cotton price tends to fall.

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