Trump promised to bring back manufacturing to the US, but it seems like China may be the one leading the push to onshore production. With the Trump administration’s decision to impose new tariffs on more than 90 countries starting 7 August, Chinese manufacturers are finding that the logic of offshoring production to avoid long-standing China tariffs — including from previous US administrations — may no longer make financial sense, the Financial Times reports.

Chinese factories abroad now face incoming US tariffs — some of which are higher than those imposed on China. The “China plus one” strategy had seen Chinese companies — often with state support — invest bns in opening up shop abroad in nearby countries to circumvent US trade restrictions and tariffs, which came to a crescendo under Trump’s first term. But with China now facing a much less severe 30% tariff — down from 145% — it makes little sense to stay in countries with higher tariff rates like Laos and Myanmar.

The impact may be felt further afield, possibly here in the MENA region. In addition to countries like Iraq facing significantly higher tariffs from China, all countries face a 40% tariff on goods understood to be transhipped from China to the US via a third country. The problem is that what qualifies as transhipped goods is not completely clear, with Chinese factories abroad that use inputs from China for production potentially falling prey to the rule. While many Chinese companies with existing operations here may stay put to wait and see, the move by the US will certainly weigh on Chinese investor sentiment for investments abroad.

But some think the move could also push Chinese companies to seek low-tariff markets outside of Southeast Asia, which is good news for countries in the region assigned the US’ baseline 10% tariff like the UAE, KSA, and Egypt. While some companies may move production back to China, others “will seek new manufacturing bases further afield,” according to Oxford Economics Asia economist Louise Loo.

MARKETS THIS MORNING-

It’s another morning with Asian markets in the green — South Korea’s Kospi is looking at gains of 1.5%, Japan’s Nikkei is up 0.6%, and the Shanghai Composite is up 0.4%. Meanwhile, the Hang Seng is in the red, down 0.2%.

TASI

10,839

+0.1% (YTD: -10.0%)

MSCI Tadawul 30

1,397

-0.1% (YTD: -7.4%)

NomuC

26,891

+0.5% (YTD: -14.6%)

USD : SAR (SAMA)

USD 3.75 Sell

USD 3.75 Buy

Interest rates

5.0% repo

4.5% reverse repo

EGX30

3,549

+1.1% (YTD: +15.0%)

ADX

10,299

-0.2% (YTD: +9.3%)

DFM

6,126

+0.2% (YTD: +18.7%)

S&P 500

6,330

+1.5% (YTD: +7.6%)

FTSE 100

9,128

+0.7% (YTD: +11.7%)

Euro Stoxx 50

5,242

+1.5% (YTD: +7.1%)

Brent crude

USD 68.62

-1.5%

Natural gas (Nymex)

USD 2.93

-4.9%

Gold

USD 3,426

+0.8%

BTC

USD 115,310

+1.0% (YTD: +23.2%)

Sukuk/bond market index

911.32

-0.2% (YTD: +1.0%)

S&P MENA Bond & Sukuk

147.17

+0.2% (YTD: +5.2%)

VIX (Volatility Index)

17.52

-14.0% (YTD: +1.0%)

THE CLOSING BELL: TADAWUL-

The TASI rose 0.1% yesterday on turnover of SAR 4.9 bn. The index is down 10.0% YTD.

In the green: Teco (+9.6%), Sico Saudi Reit (+7.6%) and Takween (+6.6%).

In the red: Nice One (-10.0%), Thimar (-5.8%) and Al Etihad (-5.6%).

THE CLOSING BELL: NOMU-

The NomuC rose 0.5% yesterday on turnover of SAR 21.5 mn. The index is down 14.6% YTD.

In the green: Osool and Bakheet (+9.3%), UFG (+8.6%) and Fadeco (+6.4%).

In the red: Naf (-10.3%), Horizon Educational (-9.3%) and Paper Home (-7.0%).

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