The end of China’s COVID closures and return to work in March of last year signified the resumption of their role as the world’s factory floor.
March of 2021’s trade deficit reporting in the United States and China’s April export statistics tell a clear tale of who is buying and who is selling. The US government in March reported the trade deficit grew to a record $74.4 billion dollars. Complicating the imbalance are persistent reports that exporters are unable to get containers because shipping lines are preferring to send them back empty as fast as they can. The US government is looking into this, but they have a limited set of tools to combat this behavior.
The FMC has also expressed an interest in adding to their research on demurrage and detention fees by investigating whether or not China is deliberately exacerbating the global container shortage since the majority of the world’s containers are produced there as well.
In April, China reported a 32.3% increase over a year ago to $263.9 billion according to the Associated Press. Their imports were also up 43.1% to $221.1 billion. Economists are wondering, however, whether or not that meteoric growth is stalling in the face of cyclical behavior and the persistence of trade remedy duties imposed by the US and China on one another, despite the more impactful effect on many of the finished goods imports into America.
Comparing last year’s first four months to this year’s first four months is an incomplete picture given the lagging and staggered closures and reopenings first in China and then followed by Europe and the US.
From Alba’s perspective, we see continued strength across all of the sectors of our customers’ businesses, despite each having its own set of underlying challenges. For apparel importers, the continued focus on forced labor in Xinjiang province, the source of the majority of the cotton used to produce garments, creates liabilities in their upstream supply chains. The same can be said for companies involved in solar panels, because about 45% of the world’s supply of solar-grade polysilicon comes from Xinjiang.
Japan’s leading ketchup manufacturer actually changed their entire sourcing pattern to move away from tomatoes in that region as well.
For our US customers, based on the persistent upward movement in freight rates, we are fielding questions about how importers can manage some kind of cost containment. We have been having conversations about concepts such as first sale pricing and utilizing Section 321 entries to reduce landed cost and duty, where and when permissible.
To learn more about Alba’s cost-saving measures and to schedule a consultation, contact us today.
