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Trinh

@Trinhnomics

Jul 18, 2019 • 21 tweets • 7 min read • Read on X

Scrolly

Good morning🌞 - very hot & hazy today so my usual morning hike was le short & more like a stroll. Anyway, US data overnight was meh & weakened the USD somewhat. In Asia, the morning started w/ a whimper as Japan exports contracted -6.7%YoY in June & imports worsened to -5.2% 😬

Got BOK decision at 9 & consensus is a hold but think it should cut rates & if not a cut now the next meeting is fair play. Indonesia'll commence its easing cycle or shall I say reversal of last yr's excessive tightening due to a hawkish Fed. Jokowi's infra push needs a nudge 🇮🇩!

Asia exports in June %YoY (in USD so some FX impact):
Vietnam 🇻🇳+8.5%🤗
Taiwan 🇹🇼+0.5%🙂
China 🇨🇳 -1.3% 😬
Japan 🇯🇵-6.7% 🥶
Indonesia 🇮🇩-9% 🥶
India 🇮🇳 -9.7% 🥶
Korea 🇰🇷-13.5% 🥶
Singapore NDOX 🇸🇬-17.3% 🥶

Q: Who's most impacted?
Korea and Singapore, both heavy exporters👈🏻

If u just take a simple average of Asian exports in June then the contraction WORSENED so u can see that things not looking good for economies very dependent on external demand (🇸🇬🇰🇷😉) & also China given its slowdown. Vietnam recorded strong growth & Taiwan nudged to positive🤗

Chart shows Vietnam diverged from Asia's worsening contraction for 3 reasons:
a) Labor costs comparative advantage (inputs like electricity cheap) & tariff arb;
b) Proximity to China so China +1 strategy
c) Gov focuses on this through trade deals & incentives
d) Infra improving

So the BOK move was exciting but let's get back to my regular programming of Asian exports. How about we talk about China trade? U'd like that wouldn't you?

Okay, June trade was not great for China & China is important b/c it lifted the world out of the GFC & now it's tired 👇🏻

How tired u ask? Well, very b/c of high leverage by the firms, which is domestic in nature & also stress by rising risk aversion despite PBOC easing & tougher external environment.

Ok, wut to do? Imports are CONTRACTING & exports a little better but not good. Ytd exports +0%😬

Stats for June %YoY: Exports -1.3% & imports -7.3% in USD; Ok, but u saw that I smoothed it due to volatility of data & trend is negative esp imports.

How negative? Ytd (Jan-June) exports +0% but imports -4%👈🏻! What does that mean?

Trade surplus +34% ytd & that's the bad news😬

No this +34% of trade surplus is not a sign of strength but rather weakness of domestic demand & don't forget that Xi Jinping had that import fair in Nov which hasn't really turned out to be a big beginning for China import soft power. China boosted global growth & now it's TIRED

If China is not importing as much as before (-4% ytd) then we got a global demand problem if NO ONE PICKS UP THE SLACK. The US is somewhat but not really. Not Europe. Not Asia either & defo not Latam or the Middle East.

Okay, so the -4% is really bad news for Korea for example.

So the -4% ytd import contraction is the aggregate & no everyone is losing out on this sagging Chinese demand. Table below show China exports & imports in Q1 & Q2 by %YoY.

A lot to digest here but let's focus on imports in Q2. Look at Korea -14%, Japan -7%; Taiwan -8%; US -28%

Q2 import growth by China is interesting b/c it shows also the UNEVENNESS OF DOMESTIC CHINESE GROWTH. The 6.2%YoY in Q2 u see from 6.4% in Q1 looks smooth but it masks the divergence of performance.

So Australia +11%. Why? Chinese gov is pushing infra to smooth out the biz cycle

What u're seeing in terms of destination of of imports reflect what's going on in mainland China - growth is uneven by ownership of firms, size of firms & by sectors so don't just take 6.2% & call it a day. As always, the devils are in the details & so study the details of data.

Ok, so let's go back to trade. We know imports are -4% ytd & we know that there are bigger losers of this lackluster demand (yes, Korea is a big loser of declining Chinese demand b/c Korea has the LARGEST EXPOSURE TO CHINA as China is its largest export destination: 25% of total)

Australia is a winner of China infra push so anyone studying the AU market studies Chinese policy b/c it's really about what they want to give incentives via taxes, credit & of course SOEs & local govs.

In all, the decline of Chinese imports is bad news & percolates globally.

So China, by using its current account & by that I mean imports, as a 1st line of defense = China stablization of growth is less helpful to the world as before.

This is key & this is why u see languishing regional exports despite China 6.2% YoY GDP growth in Q2 2019 👈🏻

Why is China using its current account (importing less from the world = spending fewer dollars on foreign goods & so helpful to the CNY as the trade surplus rises) as a 1st line of defense?

B/c NO LONGER able to easily GROW export earnings. Exports expand 0% ytd 😬so no growth👇🏻

Let's look at Chinese shipment overseas by destination in Q2:
Australia down -5% in Q2, why? B/c Australia is not doing that well so its demand lower
HK down
India down
Japan down
Indonesia zero growth
Japan down
Korea down
Singapore down
Thailand zero growth
USA down -8% 🥶

Okay, the US is important b/c it is CHINA'S LARGEST DESTINATION BY COUNTRY, making up roughly 16-20% of total exports.

So the decline of US demand by -8% in Q2 & -9% in Q1 is very very bad news for Chinese exporters & so they need to find new markets or ways to arbitrage losses.

The bad news is that this friction to trade w/ its #1 customer is not going away & will be a source of stress into H2 19. Chinese exporters are clever so will offset w/ arbitrage via diverting trade or re-routing investment but bad news is that it's not just the US getting tough.

Btw, trade & investment go together. U know that b/c it's in my pinned tweet & I always emphasize this.

If exports are not expanding & the outlook is murky at best, then u bet the enthusiasm to investment is very curbed. Nominal FAI data remains weak despite the gov's support 👇🏻

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More from @Trinhnomics

Trinh

@Trinhnomics

Aug 1

Guys, let's do it. All things Trump tariffs. Here we go. First, let's talk about the basics. 10% is the floor as in everyone gets that. And these are the economies that get higher than that:
15% (EU, Japan, South Korea and 33 countries: Angola, Botswana, etc.)
18% (Nicaragua)
19% (Cambodia, Indonesia, Malaysia, Pakistan, Philippines, Thailand)
20% (Bangladesh, Sri Lanka, Taiwan, Vietnam)
25% (Brunei, India, Kazakhstan, Moldova, Tunisia)
30% (Algeria, Bosnia and Herzegovina, Libya, South Africa)
35% (Iraq, Serbia)
39% (Switzerland)
40% (Laos, Myanmar)
41% (Syria)

In Asia, it looks like this. Excluding China and Myanmar, Laos, India got the highest - 25% and maybe more.

China is waiting for talks on extension. Right now, it's 10% reciprocal + 20% fentanyl during extension + 25% during Trump 1.0

Southeast Asia gets 20% to 19% except Laos & Myanmar at 40%, Brunei is 25% but energy is exempt so...

India original was 26% so 25% seems bad but frankly not too far from the Southeast Asians. That being said, India was aiming closer to 15% as Vietnam got dropped from 46% to 20%.

Anyway, let's talk about details of the White House info.

It goes into effect 7th August. But if you got stuff in ports/front-loading and not yet consumed till 1 October, there are varied rates for them.

Long story short, there is still time to negotiate this down before it goes into effect basically.

Read 13 tweets

Trinh

@Trinhnomics

Jul 30

Trump tariff strikes India at 25% plus Russian oil import punishment. Is it a surprise? Not exactly. I have been thinking for a week what a US India deal look like. And to be honest, I think I saw this coming. I think India can negotiate down from this threat btw. It's not final. But how much lower and what are the costs?

Why is it not a surprise that India is not getting the deal that it is working hard on?

First, let's look at the EU and Japan - they got smacked with 15% tariff & got reprieve for auto (and other sectors) but auto is key at 15%.

So 15% is the best India can get. And it won't get it. Why? Well, it has to offer a lot to Trump to get that and it won't.

Remember that this is just a threat (similar to what Trump did with Japan before they settled on a lower number) and the threat I suppose can be real or not. Irrespective, he cares about it enough to post about it.

Trump has a few agendas that he wants India or Modi's help with.

Ending that Ukraine War is one. And India is not interested in that. It's an emerging country that buys where it can cheapest.

Russian oil is cheapest & so it buys from Russia & Trump wants to starve Russia of oil revenue. India doesn't want to not buy the cheapest oil possible. Besides, Russia is neither a foe nor a friend.

Maybe the West's foe but not India. So on this point, very hard. What are the costs to India? Well, it will have to pay more for its oil if it doesn't buy the cheapest oil.

Trump is adding to that costs - tariff.

Read 6 tweets

Trinh

@Trinhnomics

Jul 28

India imported 15,000 cars a year. Why? It has 110% tariff on autos. Now, trade negotiations are not going well and it's approaching the WTO on Trump's 25% auto tariff.

But the reason is simple. India exports more than it imports autos. Why? It has pretty high tariff on auto.

What would an India trade deal look like then? Is there going to be one?

What's interesting is that the UK and India signed a trade deal that is supposedly a huge game changer.

Let's take a look at it.

Under the agreement, tariffs on imports of internal combustion engine (ICE) cars will be slashed to 30-50% in the first year of implementation, but with the benefit limited to a quota of 20,000 cars.

The tariffs will be reduced gradually, and after 15 years, they will become 10 per cent, with the quota set at 15,000 units. For out-of-quota imports of ICE cars, the duties are reduced to 60-95 per cent in the first year, and further to 45-50 per cent from the tenth year onwards.

So on the surface, it looks like a big deal but the quotas are so tiny that it makes one wonder.

Of course, relative to annual import, quotas are HUGE as it is MORE than annual import.

But why do people care so much about US 25% auto tariff but don't care so much about India's 110% auto tariff?

Well, because the US imports 8m cars EVERY YEAR.

Look at the big deal that is the UK and India trade deal liberalization. There is a limit in quota.

The quota that the US sets for the UK is 100,000. So in other words, the US remains a big deal and one that needs to be negotiated with.

Read 4 tweets

Trinh

@Trinhnomics

Jul 16

Reading this article with great amusement with tons of comments that are so emotional & not backed by why. And they all seem so surprised on outcome. I have been saying this all along - the pass-through of tariffs are not as you think it will be. Why? Because you need to understand how they work & who has the negotiating power.

First, this statement here: "China’s retaliatory tariffs on American imports, the most sustained and significant of any country, have not had the same effect, with overall income from custom duties only 1.9 per cent higher in May 2025 than the year before."

ft.com/content/82e32f…

I mean, it seems to admire China's retaliation, as in it, that is the great thing to do.

Why didn't China collect more import duties even though it retaliated?

Well, because China is not GROWING its imports. It's exporting its deflation.

So its retaliation doesn't have as much "meat" so to speak. They need to sell more than they need to buy.

"But despite US tariffs hitting levels not seen since the 1930s, the timidity of the global response to Trump has forestalled a retaliatory spiral of the kind that decimated global trade between the first and second world wars."

They are so upset at the world for not retaliating. You can sense that in the usage. But remember, the US is a lot of countries' number 1 export market.

So you are not going to PISS off your #1 customer. It's just that simple. Why? Because a lot of countries just don't want to be powering their GROWTH via GROWING IMPORTS.

So what? Well, you then be captive to your "customer". You can always sell somewhere else.

Remember that India got like TONS OF TARIFFS. No one says much. They just say, well, they just tariff Indians & make it expensive for them to buy. Do they retaliate with the same tariff? No. They can, but why would you match someone's policies.

These are Trump's policies on US IMPORTS. You can also TAX your own imports. Btw, MANY COUNTRIES DO.

Read 5 tweets

Trinh

@Trinhnomics

Jul 9

Let's talk about India today. I'll be on @CNBCi at 11am HKT to discuss this particular issue.

First, we all know that India is amongst the least trade exposed and least exposed to the US amongst the big traders.

That being said, the US is the MOST lucrative export market and one it MUST grow if it wants to GROW OUTWARD AND UPWARD through trade.

Why? Look at China PPI today - it's is -3.6%YoY. Look at the Chinese yuan. It is not appreciating like crazy versus the USD. So what? China manufacturing is TOO competitive and will COMPETE with India so exporting to China is not a HIGH MARGIN BUSINESS.

That is the same for everyone who is a big trader. China is a competitor. So fierce that even the Chinese government is struggling w/ this onshore deflated PPI situation so you can see why foreign competitors are pissed off.

First, let's zoom in - India's export as a share of GDP is roughly 2.5% of GDP in 2024. As mentioned, 0.8% is exempted now (pharma, electronics etc). But EXEMPTIONS ARE TEMPORARY. Today, we got threats of 200% tariffs on pharma for example.

Anyway, 1.3% of GDP faces 10% tariff now that will go up to 26% by 1 August if not successfully negotiated down.

India is not too exposed by Trump auto and steel but still somewhat.

Let's look at top 15 exports to the US.

#1 PHARMA, currently exempted but faces sectoral tariffs of a lot.

Look at what India exports to China - ZERO. Zero pharma. 3bn to the EU and 9bn to the US.

So here, you can see that INDIA NEEDS A DEAL.

You can go through all the sectors. Note something. In phones, the EU is a bigger market than the US. Yes 8bn vs US 7bn.

But the EU is not a country but made up of 27 countries. So the US is the LARGEST market by a long shot.

Look at all the ZEROS for China for top items. Not a good market for India.

Read 9 tweets

Trinh

@Trinhnomics

Jul 8

Good morning,

As promised, here is a thread on Trump trade war and what Asian countries are going to do or shall I say who has more room to give Trump a deal than others.

@Trinhnomics interview at 17 mins.

First, let's start with one certainty: Trump tariffs are higher, and they are on sectors (50% steel, 25% alum, 25% auto & more under study), countries (China 20% fentanyl, Canada & Mexico 25% fentanyl w/ USMCA qualified products 0%, and of course 10% reciprocal tariffs on everyone w/ extension ending 1 August for everyone & China 9 August.

Okay, so what?

Okay, let me first discuss the below chart that summarizes the impact on Asia and why different economies will have different negotiating priorities with the Trump administration.

First, big picture. Exports to the US as a share of output (GDP) of respective countries.

Vietnam is the most exposed by a long shot to the US. And that explains why Vietnam was most motivated to climb down from that 46% level to 20% now (40% for transshipment - we discuss later).

Exports to the US was 30% of GDP in 2024. Yep, that high. Good news? more than 10% of GDP was already exempted as Vietnam's largest export was electronics, namely phones, and thus that was exempted.

The rest enjoy 10% until 1 August and then 20% tariff. On a sectoral level, Vietnam faces 50% on steel and 25% on auto but as a share of total, not a big deal, even if not good for those sectors.

Read 15 tweets

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