The Impact Of Tariff Policy Needs Time To Digest In The Textile Industry

The United States imposed high tariffs on China on April 10. It suspended the implementation of "equivalent tariffs" for 90 days for 75 countries around the world, but still imposed 10% of the basic tariffs. Therefore, before the imposition of tariffs, there was an obvious act of scrambling for exports in the market, indicating that downstream production will be affected after the imposition of tariffs. Although there is a 90 day window period for Vietnam and other countries to collect only 10% basic tariff, for the cotton textile industry, this time period is more to promote the de stocking of cloth and clothing. Therefore, from the perspective of time cycle, it will inhibit the yarn production process in a certain period of time.

　 Tariff policy inhibits overall consumption

Trump has recently given the schedule for tariff negotiations in 3-4 weeks, so we can observe the negotiations in this period. However, based on the repeatability of Trump's remarks, the market is still facing greater uncertainty. As long as the tariff does not return to the original level, although there will be supply chain adjustment, it is qualitatively destructive to the final consumption at present.

On the supply side, despite the uncertainty of the weather, cotton is still at a high level, which leads to the surplus pattern of cotton on the supply and demand side. In addition, what matters is not tariffs, but the collapse of the old order. We are experiencing a systematic collapse of the global monetary, political and geopolitical order, which is the only one in our lifetime. Therefore, the macro side also continues to face tail risk.

　　 Conclusions and prospects

The impact of the tariff policy shock on prices is relatively large, but it may have been realized in terms of prices. However, the industry will usher in the off-season of demand, and the tariff negative will be fermented in the time cycle, and the macro negative has not been completely lifted, so it is still treated as a weak rebound. The occurrence of a reverse trend market depends on the improvement of macro drivers, changes in demand expectations, or unexpected large variables in supply in the new year.