According to a report from [Aluminum Road Network], the mutual tariffs between China and the United States have limited impact on the supply side of non-ferrous metals.

(1) In terms of copper varieties, China imports copper scrap and concentrates from the United States, which together account for 3.4% of China's apparent demand, which is relatively low and is easily replaced by supplies from other regions, thus affecting domestic copper supply limited.

(2) In terms of zinc varieties, China’s annual imports of zinc scrap totaled only 13,800 tons. It can be inferred that imports from the United States are extremely limited; in addition, imports of zinc concentrate from the United States only account for 0.4% of China’s total imports of zinc concentrate. Zinc only accounts for 0.1% of imports, and the two together account for 0.1% of domestic demand.

(3) Aluminum species. China imports 600,000 tons of aluminum scrap per month from the United States each year, accounting for about 1.5% of China's total aluminum supply. Taking into account the relative surplus of domestic aluminum production capacity, this part of the output can easily be made up on the premise of maintaining a stable supply of bauxite even if it is not imported at all.

(4) Nickel varieties China's nickel industry has a limited intersection with the United States. In the future, even if import tariffs are extended to products such as ferronickel and electrolytic nickel, there will be no impact.

The impact of the Sino-US trade war on the demand side needs to be closely tracked. If calculated based on the 1% drag on GDP growth, the reduction in demand may be 70,000 tons of copper, 200,000 tons of aluminum, 37,000 tons of zinc, and 14,000 tons of nickel. However, we also need to pay attention to the pressure of the Sino-US trade war on the slowdown of domestic economic growth. China has introduced economic stimulus measures to hedge the impact of the Sino-US trade war. Increasing infrastructure investment will undoubtedly increase the demand for non-ferrous metals. The United States imposes high tariffs on China and other countries and regions, which will lead to the rise of global trade protectionism. Other countries may follow the example of the United States in establishing high tariff barriers to achieve their own goal of protecting companies. In particular, we need to pay attention to the follow-up actions of the European Union and Japan.

1. China's economic changes since my country and the United States imposed tariffs on each other

1. The levying of tariffs on each other has a significant impact on Sino-US trade

After October 2018, Sino-US trade will face the environment after the tariff increase. As shown in Figure 1, it can be seen that the year-on-year growth rate of bilateral trade has deviated from the previous trend and has fallen sharply. But by contrast, the decline in China's import growth from the United States is much greater than the decline in export growth. There may be many factors that have led to this result, but there may be two obvious reasons. One is that the price of China's imports from the United States is relatively elastic. When the import price increases, China chooses to reduce the amount of imports from the United States; the other is that China imports from the United States. Commodities have undergone re-export trade to avoid the impact of tariff increases on import costs, but re-export trade also needs to consider cost issues, so the total amount may not be too large.

2. Mutual tariffs have limited impact on the overall import and export trade of Chinese goods

After October 2018, the year-on-year growth rate of China's import and export trade has declined to varying degrees. The year-on-year growth rate of imports dropped sharply from over 20% to around -5%; the growth rate of exports during the same period declined, but the overall decline was much smaller than that of imports. The mutual tariffs imposed by China and the United States have had a certain impact on China's total trade volume. However, there are other factors that have an important impact on trade during the same period and cannot be ignored. First, the economic activities of the Eurozone, Japan and other countries have slowed down sharply, which has caused a drag on my country’s exports; second, the downward pressure on my country’s economy has gradually emerged, and domestic demand has slowed down seriously, which has dragged down imports; third, oil prices have dropped significantly and lowered. Crude oil imports; fourth, the obvious depreciation of the renminbi exchange rate will help expand the trade surplus. Although the mutual tariffs imposed by China and the United States have had a significant impact on the bilateral trade between the two countries, it is difficult for China’s commodity trade to ignore other factors and discuss the impact of this factor alone. Certain changes have taken place in the trade pattern.

3. The Sino-US trade friction has a significant impact on entrepreneurs’ confidence

Since the third quarter of 2018, due to the worsening of Sino-US trade friction, the entrepreneur confidence index surveyed by the People's Bank of China has continued to weaken. At the end of 2018, the index had fallen from a high of 75.8 to 67.8, a rapid decline. In the first quarter of this year, Sino-US trade talks are improving, and the government has successively introduced countercyclical and structural policies to give entrepreneurs confidence, and the index has rebounded. Looking at the historical data of the index, in a normal year, the fluctuation of the index is relatively small. The recent volatility has obviously been affected by the Sino-US trade issues.

4. Import and export trade in the first quarter of 2019 drove China's economic growth by 1.5%

In 2018, net exports contributed negatively to GDP growth, which was -0.6%. In the first quarter of this year, net exports boosted GDP growth by 1.5%, the highest value since last year. Although my country's export growth rate was relatively high in 2018, and its export value was relatively large, my country's import growth rate was even higher during the same period, resulting in a severe reduction in overall net export value, which brought a negative pull to GDP growth. In the first quarter of this year, the opposite was true. Although exports were not good, imports declined faster, resulting in overall net exports that greatly boosted GDP growth. Of course, it cannot be said that the Sino-US trade friction has actually brought benefits to the Chinese economy. From a dialectical point of view, first of all, the expansion of the surplus is related to many factors, not caused by tax increases alone. For example, in the first quarter of 2019, oil prices fell by 2.5% on average compared to the first quarter of last year, while oil prices in the fourth quarter of last year were lower, reducing imports; in addition, the RMB exchange rate depreciated by 6.1% year-on-year in the first quarter. These two factors The impact on my country's trade pattern is relatively large. Secondly, my country's economic situation was still relatively poor in the first quarter, and domestic pessimism was relatively serious, which affected imports, especially capital goods. Finally, it is the impact of Sino-US trade friction. From an objective point of view, tax increases have indeed expanded the surplus between China and the US, thereby expanding the overall trade surplus.

2. The possible impact of mutual tariffs on China's economy

Increasing the tariffs on Chinese products exported to the United States from 10% to 25% will affect the Chinese and American economies in many ways, and even threaten the growth of the global economy.

1. Raising tariffs may significantly reduce the volume of Sino-US trade, and the surplus may be significantly narrowed

First, the export volume has decreased. It can be seen from the attached table that a large part of the tariff-imposed products are labor-intensive products with low and medium value added, such as furniture, shoes and hats, and mechanical and electrical products. Among them, the industrial chain of furniture, shoes and hats is not long. , The price sensitivity is high, and the impact will not be too great when the tariff increase is still small, but if the tariff increase is increased to 25%, the impact on the price will become significant, and the export volume may be significantly reduced. Second, the decrease in the value of imports is relatively small. As a surplus country, our countermeasures are not equal. The higher the tariff and the more product categories, the more obvious the difference will be. Therefore, the decline in my country's imports may be far less than the decline in exports. The above two points together led to a narrowing of the surplus.

2. The number of employees in China’s export sector is large, and tax increases may lead to a reduction in the employment of small and medium-sized enterprises

Employment is not only an economic issue, but also a social and political issue. Premier Li Keqiang made important instructions at the National Employment and Entrepreneurship Work and General College Graduates Employment and Entrepreneurship Video and Telephone Conference, and emphasized that this year's employment pressure is still great, especially when the number of college graduates hit a record high, and there are many factors that affect stable employment. All regions and departments must attach great importance to it. Therefore, the operation and implementation of policy measures will take overall consideration of the changes they bring to employment and give priority to employment; economic policies such as fiscal, taxation, finance, industry, investment, and trade will focus on the linkage with employment. If conflicts are found, employment will be given priority. .

Among China's exports to the United States, low- and medium-value-added manufacturing products account for a large share. Although technological progress has brought efficiency improvements in recent years, these industries are still relatively labor-intensive, which objectively solves a large number of jobs in China. If these departments are hit, the sales of their products are blocked, and the plant is closed, which leads to a reduction in labor, it will have a greater impact on China. We are currently facing an unfavorable situation where the unemployment rate has risen and employment pressure has increased. If the problem of labor reduction in the export sector is superimposed, it may cause economic problems, and stabilize consumption and expand domestic demand will be affected. Economic problems may even cause social problems. In contrast, the labor market in the United States is quite tight, and its trade sectors are agriculture and high-value-added manufacturing. Both sectors have relatively high productivity. Even if they are hit, the number of unemployed persons may not be too large. It will be particularly serious.

3. The more important issue arising from tax increases may be confidence issues

As mentioned above, since the tax increase in 2018, the confidence of entrepreneurs has been severely impacted. A typical manifestation of a decline in confidence is a decline in investment. In the first quarter of this year, the contribution of investment to GDP dropped significantly, even lower than the contribution of net exports to the economy. If tariffs are imposed, the economic implications of the adverse effects will be second, and the more far-reaching may be the impact of uncertainty on the business environment and the confidence of business operators. Since last year, the central economic conference has repeatedly mentioned the importance of stabilizing expectations, and confidence is even more important than gold. Of course, in this regard, if the United States raises taxes again, it will not only impact the confidence of Chinese entrepreneurs, but also the confidence of entrepreneurs in the United States and other countries around the world, which will have an adverse impact on global economic development.

4. China will launch more countercyclical control policies in response to the impact of trade frictions

In the first quarter, in response to the downward pressure on the economy, my country introduced a number of counter-cyclical control policies, including monetary policy, fiscal policy and some structural policies. In April and May, policies to lower the value-added tax and social insurance rates were introduced respectively. It can be said that the intensity of these policies has been relatively large, and the impact on the economy is gradually showing. In addition, my country still has some conditions for the introduction of policies, such as policies that promote consumption and expand domestic demand, such as policies that promote employment and improve job skills. There is even room for the introduction of aggregate policies such as RRR cuts and interest rate cuts. Therefore, if the escalation of the Sino-US trade friction may have a greater impact on my country's economy, the policy is fully capable of introducing more policies to hedge against such impact.