The results of the third round of China-US tariff negotiations, a matter of great concern to textile professionals, have been released. The terms agreed upon in the first round have been extended for another 90 days! Polyester filament prices have also risen again, with production and sales surging by 93.2%.
On July 29th, local time, Li Chenggang, China's International Trade Representative and Vice Minister of Commerce, announced in Stockholm, Sweden, that based on the consensus reached in the new round of China-US economic and trade talks, both sides will continue to push for a 90-day extension of the suspended 24% US reciprocal tariffs and China's countermeasures. This means that all currently reciprocal tariffs and corresponding countermeasures imposed by China and the US remain unchanged, extending their original expiration date of August 12th for another 90 days. From July 28th to 29th, local time, the Chinese and US trade delegations held a new round of economic and trade talks in Stockholm. After the talks, Li Chenggang told the media that over the past day and a half, China and the United States have implemented the important consensus reached in their June 5th phone call, fully leveraging the China-US trade consultation mechanism and engaging in candid, in-depth, and constructive exchanges on key economic and trade issues of mutual concern. According to Bloomberg, the agenda for the talks included granting both sides more time to negotiate issues such as fentanyl export controls and tariff increases, as well as China's crude oil purchases from Russia and Iran. What does this outcome mean for textile companies?
This third round of tariff negotiations between China and the United States can be best described in one word: maintaining the status quo. In the first round of negotiations in May, China and the United States lowered their reciprocal tariffs to 10%. At the time, some textile manufacturers posted on their WeChat Moments, calling this the best news they had heard this year. Indeed, since May, export data for textiles, apparel, polyester filament, and other products have indeed rebounded, and many American distributors have been restocking their shelves just as they were about to empty. Considering the recent announcement of new tariff rates between the United States and several countries and regions, even regions like the EU and Japan, which have made significant concessions to the US in other areas, have a final tariff rate of 15%. While China's 10% rate is certainly not high, taking into account the previous fentanyl tariffs and Section 301 tariffs, the combined tariff rate on Chinese textile exports to the US is still close to 50%. This still represents a significant gap compared to the nearly 20% tariffs in Southeast Asian textile giants like Vietnam, the Philippines, and Indonesia. However, in absolute terms, these countries' original tariffs on the US were 10%. With the implementation of the new tariffs on August 1st, the gap between China's tariff rate and these countries has narrowed. Furthermore, these countries' new terms include certain provisions for re-export trade, which may lead to a return of some orders to China. However, given that much of the consensus between the two sides was already reached in the first round of negotiations, the remaining areas, which concern core interests of both sides, are extremely difficult to reach, and therefore, temporarily shelving the issue is a wise move.
On July 30th, polyester filament prices rose again, with several polyester mills announcing price increases of around 50 yuan per ton. This triggered a surge in production and sales, reaching 93.2%. While the rise in polyester filament prices may be partially linked to tariff negotiations, the more direct impact is crude oil. On July 29th, international oil prices surged by over 2.34%, with Brent crude breaking through $75 per barrel. On July 30th, international oil prices continued to rise, increasing by over 3.53%, with Brent crude approaching $78 per barrel. This represents a cumulative increase of 5.87% over the two days, the largest two-day gain since February this year. Since last week, polyester filament prices have bottomed out and rebounded. Thanks to low inventory levels, polyester filament manufacturers remain strongly committed to supporting the market. However, polyester filament still faces significant cash flow losses, and manufacturers may be focusing on restoring profits.
Therefore, once there is some sign of trouble, polyester factories will raise the price of polyester filaments. The recent rise in upstream costs may to some extent fuel the rise in polyester filament prices.
