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https://twitter.com/markets/status/1461292162440642564

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Trinh

@Trinhnomics

Jan 14

Okay, yesterday, you had China rocking global trade with a USD1trn merchandise trade surplus, but by Friday (17th), we'll get news that China industrial profits are FALLING for a 3rd year in row.

What's going on? How does this work? And finally, what does it mean for the rest of the world?

Let's look at China industrial profits for 2024 from Jan to November.

It's down -4.5% & in 2023 it was down & in 2022 it was down.

Fine, but not all sectors experienced decline. These are the sectors with some profit: food manufacturing, textile, tobacco, furniture manufacturing, electricity, waste, and basically a few sectors kind of not that negative or flat - general equipment.

Sorry, meant to write a longer thread but had to go! Long story short, China is experiencing a balance sheet recession and with a few sectors growing so all that savings is being channeled to it.

That means reduced profits and which means to make more money it has to sell outward & thus that translates to profits being squeezed increasingly abroad too as it gains market share.

You can see that in the export data where exports grow but imports not so much. In Germany's case, it's losing out of both ability to export to China (Chinese imports of German stuff decline) & also China selling more of its goods in Germany.

But that is not all. The Germans are likely facing competition in third markets too.

And replace Germans with others like Japan, South Korea, and of course even not big traders like Indonesia.

So China's problem of weakening profits is global.

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Trinh

@Trinhnomics

Jan 13

https://twitter.com/fbermingham/status/1878727621967782371

Big news: China trade surplus reached 1trn in 2024. What are the losers of China trade surplus and what does that tell you about the world?

First, let me go through China's NOMINAL (volume is much higher) trade relationship with the world.

https://twitter.com/fbermingham/status/1878727621967782371

First, let's talk about the losers, as in DECLINE IN CHINA IMPORTS.

Germany saw imports from China decline by -10.7%, followed by France (-5.9%) and then Italy (-3.2%). Meaning, the Dutch still got something China want (ASLM chip making machine) but others saw decline of goods.

To add salt to injury, not only is Europe losing market share in China, Chinese goods have RISEN in Europe in nominal term or exports rose to 516bn.

But that's just Europe. It likely also lost out in other markets too, but the US. Europe gained US market share.

Who else lost out in LESS CHINESE IMPORTS (contraction in nominal term)??? Well, Thailand, which is a -5.2% contraction, Indonesia too! -4% (Chinese demand weak so commodity weak = less imports) And Japan -2.6% and also Australia -10% (Chinese demand weak so less demand for commodity etc)

And of course India at -3%. India is an interesting case because it loses in EXPORT TO CHINA BUT China has managed to export more and so India got a pretty large deficit with China at more than -100bn.

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Trinh

@Trinhnomics

Dec 20, 2024

It is a beautiful day in HK. I’m at lunch, well, waiting for my bff at a wonderful Italian place called Cantina (next door was our wedding reception 5 yrs ago) & opened up my fav pink paper & the FT Big Read was Ursula choking Europe with regulations (she also chairs a paper that also supposed give her more money to deregulate). There lies the rub. Can u let the person who has led Europe down this rabbit hole be the person to lead it out of it? Some pics from my walk from home to lunch. Hong Kong 🇭🇰 is lovely, best time to visit is October, November & December.

“Inflexible EU rules set Europe’s car 🚗 industry for failure” says critics according to the paper.

“Conservatives & far-right lawmakers accuse the bloc’s ambitious green & digital agendas of punishing citizens & businesses.”

Interesting the definition of conservative & far-right. But irrespective, you can see the results.

She & Draghi chaired a report that says the EU is uncompetitive & too regulated & strangled. Behind.

Okay, but who has been in charge?

Not the conservative & far-right. Ursula has been in charge. All along.

So if we have to measure her performance with, well, outcome, then what is the score card? She said it herself in the report.

If kept at the same rate path, well, well…

Read 7 tweets

Trinh

@Trinhnomics

Dec 6, 2024

The RBI just cut the cash rate by 50bps and kept the policy rate on hold at 6.5% as slowing government spending and a weakening manufacturing sector is dragging down GDP growth.

This is my short thread on examining the India-Japan investment and trade relationship & why they haven't changed much in 10 years despite India being a big domestic demand market that Japan needs.

I argue that this is symptomatic of what is happening to Indian firms themselves. They find it hard to scale and leverage the labor endowments the country has.

How do we change this? Well, by changing the norms of thinking that the government needs to micro manage everything. It should set framework but let Indian private sector flourish.

Let's go.

First, what is the India Japan relationship? Well, it's getting better but remains SMALL relative to the ASEAN Japan (Vietnam Japan for example). Japan investment to India despite India being a huge domestic demand market that is super complementary to Japan weak demographic trends is at 4% of total. Look at ASEAN. Yes, at peak around 28% and settling about 24% of total.

India is a ginormous market. So why growing just from 2 to 4% of total???

Now let's look at Japan imports from India - it basically remains flat at a small level of 1% of total. Meanwhile, imports from China is 22% and ASEAN 15%.

So Japanese FDI to India has increased to 4% of total but imports remain small.

Basically this relationship remains small and has a lot of scope to grow.

Read 10 tweets

Trinh

@Trinhnomics

Dec 2, 2024

I'm going to Delhi this Thursday for the India Japan Conference. Excited to go. The key thing I will emphasize while India is how much India needs manufacturing.

The contraction of manufacturing in Q3 2024 led to sharp slowdown of GDP to 5.4%YoY.

India needs manufacturing not just for cyclical growth but social stability. There is no way you can absorb that many people from the rural sector without manufacturing.

The government needs to put all its effort behind this. Manufacturing is the future. It is an essential ingredient to growth.

Why? Because we still live in a material world. How do I know? India has about USD100bn deficit with China in manufactured goods.

Shared my views in this documentary:

My op-ed on India jobs & manufacturing and why there must be more emphasis on manufacturing:

asia.nikkei.com/Opinion/India-…

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Trinh

@Trinhnomics

Nov 21, 2024

https://twitter.com/Trinhnomics/status/1014791235452588032

Guys,

Are you ready for a Trump tariff thread and what this means? This is going to be a bit of a technical one but I'll make it easy & fun & we'll go through literature & analysis.

Let's go.

https://twitter.com/Trinhnomics/status/1014791235452588032

We start with the basics. How does tariff work? First, as you know, the US is a big free trader. Still is despite tons of tariffs on China. So goods in the US generally are tariff free to import & hence proliferation of foreign goods in the US.

But that being said, it does impose tariffs & duties. Sometimes overtly targeting a specific product to protect domestic sector due to lobbying. Anti-dumping duties is an example. A country that is not a market economy is an easy target (China, Vietnam) as u can say those countries have subsidized excessive production & hence duties.

But comes Trump. He has been consistent since the 1980s about the US trade deficit which he has railed against in public interviews and what does he do.

He started a US-China trade-war on washing machine duties.

Before we talk about what has Trump 1.0 (=first term 2017 to 2020) & Biden (2020 to 2024) done in terms of tariffs, I want to talk about the practicality of WHO PAYS FOR TARIFFS.

The IMPORTERS pay for tariffs. By that, American importers pay for tariffs. So when an item say costs 100 goes to 125 because of a 25% tariffs, there are a few things that COMPANIES that import can do.

They can PASS ON that cost to CUSTOMERS (buyers of goods). They can ABSORB that cost. They can FIND A NEW SOURCE to import. Or the SELLER can make the item cost 80 or a 20% reduction of previous price to then when the seller pay 25% that is just 100 BUCKS of import costs so the SELLER ABSORBS this margin compression.

That 25% goes to the IRS as government revenue. Who pays for it? Well, it depends on who ABSORBS THAT COSTS of 25% but surely 25% tariffs happen.

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