What Impact Will China's Motor Industry Have On Trump's Election?

- Nov 13, 2018-

Trump defeated Hillary and basically announced that he will be the 58th and 45th president of the United States next year. This is beyond many people's expectations, and is even called the "Black Swan Incident." It can be seen from Trump's campaign manifesto that US policy will undergo great changes. The impact of this reform on the world must be enormous, including economic, political, military and other aspects.

So what is Trump’s attitude towards the Chinese economy after its election? How will these affect the Chinese motor industry?

In the campaign declaration, Trump showed full hostility towards China's merchandise trade and vowed to impose a 45% punitive tariff on China, which will make China's import and export trade face a huge dilemma.

In addition to tariffs, Trump is also preparing to attack China's RMB exchange rate. He promised to order the Finance Minister to declare China a currency manipulator in order to resist the impact of cheap Chinese goods.

Once Trump announced that China is a foreign exchange manipulator, the United States has legally removed the obstacles to China's trade finance war. The United States can legally carry out financial trade strikes against China through trade protection measures. By then, China's exports will suffer another major blow, especially for labor-intensive enterprises, and motor companies are not immune.

Customs statistics show that in 2015, China's motor export volume was 7.433 billion US dollars, accounting for about 10% of the global market share; from the perspective of exporting countries/regions, the United States is the largest export market for motor exports in China.

In the international market, the export prices of China's products, especially labor-intensive products, are much lower than those of similar products in other countries. The reasons are: first, China's labor force is low, and second, due to fierce domestic competition, export companies are willing to spend their money and compete to adopt low-cost sales strategies.

Once the renminbi appreciates, in order to maintain the same renminbi price bottom line, the price of China's export products expressed in foreign currency will increase, which will weaken its price competitiveness; and if the foreign currency price of export products does not change, it will squeeze the export enterprises. The profit margin will impact the exporting enterprises, especially labor-intensive enterprises.

For more companies that sell products to foreign markets, once the renminbi appreciates, the price advantage of the company's products will gradually decrease, and the foreign market's procurement activities for domestic products will be correspondingly reduced, and then the profits of the company will be reduced. It has been cut down sharply. Of course, there are also some cases in which enterprises export to domestic sales.

Then, for companies that mainly focus on selling products in China, will the RMB exchange rate fluctuations have no effect? Actually, it may not be.

The rise in the RMB exchange rate will stimulate the import of products, and the price advantage of local products will be affected. And the market is very complicated, a company may not export, but it is possible that some of its customers are exporting enterprises; the scale of customer production is shrinking, and enterprises will naturally be affected.

Of course, the above inferences are based on Trump's campaign speech. Given Trump's consistent "big mouth" style, it is difficult to judge whether these words for canvassing can be truly translated into the US foreign trade policy. And when it is actually implemented, Trump can't ignore the opinions of the American elite, and it is even more impossible to disobey the interests of interest groups.

However, what is certain is that the international economic situation is still not optimistic, but in the long run, the demand for electric motors in the international market is still at a high growth stage, especially for the export of high-end products such as high-efficiency energy-saving motors and small and medium-sized motors.

In order to further expand the share of domestic motor products in the international market, domestic motor product export enterprises should adjust product structure according to national industrial policies, improve product technology content, try to avoid market vicious low-price competition, and seize the national implementation The historical opportunity of major strategies such as “All the way”, China Manufacturing 2025, and intelligent manufacturing, with the drive of innovation, intelligent transformation, and green development as the guiding ideology, take the road of high-end and characteristic export products, actively expand the scope of international cooperation, and strive to achieve leap-forward development. Win a place in the fierce market competition abroad.

For the domestic market, although China's micro-motor consumption has accounted for more than half of the global micro-motor production, but in terms of average number, the average household share of micro-motors in developed countries is 80 to 130, while China's big cities The average household ownership is only between 30 and 60, and the room for growth is still large. With the rapid growth of communications, micro-video games, consumer electronics and healthcare equipment industries, the micro-motor market will have long-term strong demand, but due to its complex production process, high precision and power consumption requirements, domestic micro-motors still exist. Great innovation and room for growth.



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