Trump’s tariff blitz could choke China’s alternative exporting routes

The Trump administration is intensifying efforts to undercut China’s exports by targeting transshipment networks, raising tariffs and tightening supply-chain rules on goods routed through third countries, according to Bloomberg analysts. This strategy risks choking off 70% of China’s exports to the US — equivalent to over 2.1% of China’s GDP.

Since Trump’s first trade war during his first term, China has increasingly leaned on countries like Vietnam, Mexico, and parts of the EU for finishing goods or components bound for the US, in a bid to cushion the blow of US tariffs. China’s share of value-added manufacturing via third countries rose 22% in 2023, up from 14% in 2017, according to Bloomberg Economics.

Away from China or else: Trump’s administration is threatening to slap 25-40% tariffs on goods from Cambodia, Indonesia, Laos, Malaysia, and Thailand to enforce his terms — including curbing China’s exports — in trade negotiations ahead of his 1 August deadline. Vietnam was the first Asian country to yield, accepting an agreement that puts a flat 20% tariff and a 40% levy on transshipped goods, and drawing Beijing’s criticism.

The war extends beyond Asia: The US reached an agreement with the UK in May that included security requirements for steel and pharmaceuticals, terms which were seen as an attempt to push Chinese products out of British supply chains. “Co-operation between states should not be conducted against or to the detriment of the interests of third parties,” China’s foreign ministry told the Financial Times at the time.

Business backpedal: Economists warn that enhanced tariffs or new supply‑chain mandates could significantly disrupt China’s export activity and dent long-term growth. There’s also concern that tighter rules could make international firms more hesitant to rely on Chinese components or production, harming business confidence and investment.

Yet enforcement faces its own challenges. The US definitions of “localized goods” remain vague, and verification protocols for origin remain underdeveloped, Bloomberg analysts said. The success of the policy will hinge on enforcement capabilities and compliance of third-country partners.

ALSO FROM PLANET FINANCE-

• JP Morgan may soon let clients borrow using cryptocurrencies, a sharp shift from CEO Jamie Dimon’s earlier crypto criticism. While JP Morgan won’t hold crypto directly, it could partner with firms like Coinbase to manage crypto assets. The bank already lends against crypto-linked ETFs, and is expanding to actual tokens in a bid to outpace rivals like Goldman Sachs. (Financial Times)

MARKETS THIS MORNING-

Asian markets are in the green, led by Japan’s Nikkei which jumped 2.8% in early trading on news of a trade agreement with the US. Meanwhile, Wall Street futures are showing softer gains after another record closing for the S&P 500.

THE CLOSING BELL-

The EGX30 fell 1.0% at yesterday’s close on turnover of EGP 4.1 bn (18.4% above the 90-day average). Local investors were the sole net sellers. The index is up 13.7% YTD.

In the green: Edita (+2.7%), Orascom Construction (+0.5%), and Qalaa Holdings (+0.3%).

In the red: Madinet Masr (-2.7%), GB Corp (-2.5%), and Juhayna (-2.4%).

CORPORATE ACTIONS-

#1- Macro Group’s board approved raising its authorized capital 12x to EGP 6.8 bn, up from EGP 575.0 mn, and its issued capital to EGP 684.2 mn, up from EGP 114.0 mn, according to an EGX disclosure (pdf). The EGP 570 mn increase will be funded in banknotes through a rights issue, with 2.9 bn new shares offered to existing shareholders at a par value of EGP 0.20 per share.

#2- Edita Food Industries’ board approved a plan to repurchase 14 mn shares — equivalent to 1% of the company’s total outstanding shares — as treasury shares through open market transactions over a one-month period, according to an EGX disclosure (pdf). The transaction will be funded through the company’s own resources, with Al Ahly Pharos Securities appointed as a broker to execute the transaction.

#3- Arabian Cement’s board signed off on a plan to buy back up to 15.1 mn shares — equivalent to 4% of its total issued capital — as treasury shares via open-market transactions, according to an EGX disclosure (pdf).