Chinese household appliances and solar stocks spooked by Trump tariffs reverse some losses
But uncertainty ahead as markets await outcome of intellectual property theft probe
Chinese household appliances and solar related stocks reversed some of the losses incurred on Tuesday morning, after US President Donald Trump slapped steep tariffs on imported washing machines and solar panels on Monday, by close of trade.
An analysts said the new tariffs might actually benefit Chinese companies by winning them foreign rivals’ market share in the United States.
South Korea and Mexico export the bulk of washers to the US, with much of the production coming under the umbrellas of South Korean giants Samsung Electronics and LG Electronics.
“Given leading Chinese companies’ competitiveness in these industries, they are set to benefit from the tariff by winning over some US market shares from foreign rivals,” said Wei Wei, a trader at Huaxi Securities in Shanghai. “And the domestic market accounts for the lion’s share of their revenue.”
Washing machine maker Wuxi Little Swan fell by as much as 1.6 per cent before paring losses to 0.6 per cent, to close at 74.19 yuan (US$11.58) in Shenzhen. The company derived 70 per cent of its sales in 2016 from China, according to data compiled by Bloomberg.
Qingdao Haier, China’s top home appliances maker, dropped by as much as 3 per cent before trimming its losses to 1.6 per cent, to finish at 22.50 yuan in Shanghai. Domestic sales made up 60 per cent of the company’s sales in 2016. Its affiliate, Haier Electronics Group, fell by as much as 3.3 per cent in Hong Kong and last traded 1.6 per cent higher at HK$28.05 (US$3.58).
LONGi Green Energy Technology, the world’s biggest maker of mono silicon wafers, surged by 6.3 per cent to 38.26 yuan in Shanghai. The stock had already shed 15 per cent from its record high set in November through yesterday. The US accounted for 5 per cent of its 2016 sales.
In Hong Kong, Xinyi Solar Holdings fell by as much as 0.7 per cent before trading virtually unchanged, and GCL-Poly Energy Holdings dropped by 0.72 per cent before closing unchanged.
Trump will impose a 20 per cent tariff on the first 1.2 million imported large residential washers in the first year, and a 50 per cent tariff on machines above that number. These tariffs will decline to 16 per cent and 40 per cent, respectively, in the third year.
A 30 per cent tariff will be imposed on imported solar cells and modules in the first year, with the tariffs declining to 15 per cent by the fourth year. The tariff allows 2.5 gigawatts of unassembled solar cells to be imported tariff-free each year.
The tariffs come after Whirlpool sought the washers “safeguard” action after years of anti-dumping cases, and comes after the US in August initiated an investigation into China’s theft of US intellectual property under the rarely used Section 301 of the Trade Act of 1974, marking Trump’s first shot in a trade war against China.
“Markets are focused on the positive outlook on corporate earnings right now,” said Stanley Chan, director of research at Emperor Securities. “But investors are waiting for the results of the US Section 301 trade investigation into China, and today’s news on the US tariffs could point to worsening US-China tensions.”
Such actions risk provoking retaliation from China, especially since Section 301 had fallen out of fashion with previous US leaders, who instead used the more legitimate World Trade Organisation framework.
China’s Commerce Ministry on Tuesday expressed “strong dissatisfaction” over the move, saying it “aggravates the global trade environment.”
“China hopes the US will exercise restraint in using trade restrictions and compliance with multilateral trade rules, and will play a positive role in promoting the world economy,” it said in a statement.