Brazil can earn 28.5 billion reais with the China-US trade war – 01/07/18 – EXTERIOR

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The US-China trade war increases Brazil's export potential for these two countries by $ 7.4 billion (R $ 28.5 billion) a year, according to a poll the CNI (National Confederation of Industry), made at the request of the report. The US has announced surcharges of 25 percent on 818 Chinese products worth US $ 34 billion, which will come into effect on July 6th.

An additional 284 products, worth $ 16 billion, will be subject to public consultation on July 24 and will be subject to rates thereafter. The United States accuses China of intellectual property theft by forcing US companies to transfer the technology to Chinese SOEs to gain access to the Chinese market. China has announced retaliatory duties of 25 percent on 545 US products totaling $ 34 billion, also effective July 6.

Beijing evaluates a second series of surcharges of more than 16 billion US dollars in US products, still undetermined. Overall, Brazil, like all other countries, tends to lose with the trade war because of the impact that this protectionist escalation can have on world growth and commodity prices. "But the survey shows that there are spaces that Brazil can occupy, it's time for Brazilian companies to relocate, because the US and China will look for other suppliers" explains Diego Bonomo, executive director of international affairs at CNI.

Some of the US products that will be taxed in China are already exported by Brazil, such as pork, soy, and fish, and sales can increase dramatically. About 35% of Brazil's fish exports – fish, crustaceans and molluscs – are destined for China. Brazilian products paid a 12% surcharge to enter the country, and today they pay 7%. Most fish exporters to China have no tariffs. "With the Americans paying 25% of the price, we will gain in competitiveness and we will migrate to the Chinese market, which will pay better," said Eduardo Lobo, president of Abipesca (industry badociation).

It expects a 12% increase in exports, or 240 million US dollars, due to the reorientation of sales and price improvement. In the case of pork, Brazil plans to double its exports to China from 48 900 tonnes in 2017 to 100 000 tonnes this year. According to the CNI study, Brazil could increase its sales in China up to 6.4 billion US dollars, exporting products it sells to other countries, but not yet for the Chinese market, or sell very little. This is the case of some chemicals, cereals, fruits and vehicles. They are also exported by the Americans, but will be priced at 25%.

"Obviously, we are not the only ones trying to conquer this market, and the new tariffs will not make all US exports to China unsustainable, and vice versa," says Bonomo. Some obstacles may prevent Brazil from taking advantage of such opportunities, such as the cost of transport to China, competition from other countries with tariff preferences and, in the case of agricultural products, non-tariff barriers. For example, Brazil exports 40,000 tons of orange juice a year to China.

But the country does not export certain types of juice, because the customs rules greatly increase the cost – and that will not change; nor the 25% tariff on American juice, which has a small share in China, would make a big difference. In the US market, the main gain will be the increased competitiveness of industrial products. Brazil exports US $ 3.9 billion worth of products in which it competes with China in the United States, including auto parts, certain types of machinery, chemicals and plastics, and rubbers. In addition, Brazil already exports around US $ 1 billion worldwide, but not in the United States, or only in very small quantities, and could be sold in the US market. .

Are there any types of vehicles and tractors, machinery and electrical materials, auto parts, plastics and machinery? For the study, CNI has studied all the products that will be taxed in China and the United States, determined which of them are exported by Brazil to the world, but not to those countries, and those which are already exported, and can increase. The CNI had to convert the US and Chinese tariff codes to a six-digit harmonized code, which implies a loss of specificity.

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