It has been more than a year since the beginning of the trade war yesterday. Tariffs have increased several times, with a final increase of 582%. High tariffs have had a great impact on China’s air conditioning export to the U.S. market. Let’s review what ups and downs China’s air conditioning export has experienced since the trade war.

China’s air conditioning export tariff increase to the United States

From surge to continuous decline, the export rhythm was disrupted

On August 1, 2018, trump tweeted that he would impose a 10% tariff on Chinese goods worth $300 billion from September 1, including air-conditioning products, which means that the day when Chinese air-conditioning enterprises have maintained a low tariff of 2.2% for many years is over.

In the month of the news, in order to avoid the cost increase caused by the new tariff, enterprises began to increase export efforts. In August 2018, China’s air conditioning export to the United States increased by 92% year-on-year. In the following September, due to the beginning of the cold year, the off-season of the industry and the forward movement of exports in August, there was little growth in exports in that month, with a year-on-year increase of only 0.8%.

However, the rumor that tariffs continue to increase came again. There is news that new year’s day will usher in a new round of tariff increase. After a brief calm in September, China’s air conditioning exports showed rapid growth for three consecutive months from October to December. Even in November, air conditioners exported to the United States increased by more than 900% year-on-year.

2018-2019.9 monthly year-on-year change of China’s air conditioning export volume to the United States (%)

Under the dual influence of the autumn Canton Fair and Sino US trade, China’s air conditioning exports grew extremely rapidly year-on-year in the fourth quarter of 2018, and maintained a high growth of 70% year-on-year in the last month of 2018.

At the beginning of 2019, the legendary tariff increase did not become a reality, but the three-month continuous growth had a great impact on the export to the U.S. market at the beginning of 2019. Due to sufficient inventory, there was a diving decline in the first quarter, which should have increased significantly in the same period, down nearly 20% year-on-year.

In the second quarter, the delayed tariff was settled in May and increased by 10% again. The export tariff increased rapidly from 2.2% to 15% in less than a year, which is even worse for the depressed U.S. export market. From the beginning of 2019 to the end of the third quarter, the trade between enterprises and the United States was weak, and China’s domestic air conditioning exports to the United States failed.

The total volume has not changed much, and the trade volume has shrunk sharply

It can be seen from the data that due to the increase of tariffs, traders have asked for price cuts to maintain profits, shrinking the trade volume of Chinese air-conditioning enterprises. Although the total export volume of Chinese air-conditioning enterprises to the United States has not changed greatly from the cold year of 2019, the export volume has decreased by nearly 7% year-on-year. From the cumulative point of view of the fiscal year, the total trade volume of domestic air-conditioning enterprises with the United States also decreased significantly, with a year-on-year decrease of nearly 25% in the first three quarters.

Change trend of China’s export volume of air conditioners to the United States in the first three quarters of 2015-2019

In such a situation, on the one hand, it plays a role in promoting the globalization of enterprise production: in order to ensure export profits and force enterprises exporting to the United States to transfer orders (production capacity) from the United States out of China, some enterprises speed up the relocation of production capacity, and some only envisaged global layout plans will become a reality in a short time. However, it remains to be seen whether this measure will continue to significantly reduce enterprises’ exports to the United States in the future.

On the other hand, it also makes China’s manufacturing industry stand the test: the increase of tariffs directly leads to customers’ increasing import demand for a short time, but the import quantity in the later period decreased significantly. At the same time, it will require enterprises to reduce product prices, so as to reduce import costs, making the sales of Chinese enterprises decline for several consecutive quarters.

At present, the Sino US trade war has begun to ease, and the tariff originally decided to increase to 30% in October has been suspended, and the tariff rate of 25% is still maintained. In early November, after many efforts of both sides, China US economic and trade consultations made significant progress, and both sides agreed to cancel the tariff increase in stages. This also brings hope to enterprises. The anxiety and cost pressure previously brought to enterprises by 30% tariff have also been alleviated.

However, after more than a year of honing, no matter how repeated the future trade situation and how the tariff changes, air conditioning enterprises are ready to deal with the tariff changes at any time. Even if the current situation continues, using external forces to promote enterprises to shift from product output to global output of technology and brand depends on good and bad. In the long run, it is a positive promotion for the development of air conditioning industry.

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