As the trade war between China and the United States continues to escalate, how will foreign furniture companies be affected?

10/06/2020

Yihua Life released its performance report for the first half of 2019 on Aug 31.

So far, the six a-share listed furniture companies whose main business is foreign trade have all released their performance reports for the first half of 2019.

The OFFICE of the United States Trade Representative (USTR) announced a 15 percent tariff on $125 billion of goods from China starting at 12:01 am EST on September 1. It includes smartwatches, Bluetooth headsets, flat-screen TVS and more. The United States will also raise tariffs on Chinese goods such as cellphones, laptops, toys and clothing on October 1 and December 15.

It has been more than a year since the trade war between China and the United States began. How has furniture trading company been affected in the past year?

We can also roughly predict the new impact of the new US tax increase on Chinese goods from September 1.

1. Most companies' profits have soared

On June 15, 2018, the US government released a list of goods subject to additional tariffs of 25% on about us $50 billion in imports from China, of which about US $34 billion will be subject to additional tariffs as of July 6, 2018, and about US $16 billion will be subject to additional tariffs for public comment. On the early morning of June 16, The Ministry of Commerce of The People's Republic of China (MOFCOM) announced its decision to impose tariffs on US $50 billion of imports from the United States.

On May 10, 2019, the US will raise tariffs on us $200 billion of Chinese goods from 10% to 25%. On May 13, the State Council Tariff Commission issued a notice of the State Council tariff Commission on raising tariff rates on some imported goods originating in the United States. On June 1, China imposed tariffs on some imports from the US.

On August 15, 2019, the United States announced a 10% tariff on imports of about $300 billion from China, to be implemented in two batches from September 1 and December 15, 2019. In response to the above measures, China has taken countermeasures, levies tariffs ranging from 10% to 5% on 5,078 items and about us $75 billion of goods originating in the US. The tariffs will be implemented in two batches from 12:01 am on September 1 and 12:01 am on December 15, 2019. On August 24, the US announced that it would raise tariffs on about $550 billion of Chinese imports.

The trade war has been escalating, with the US imposing tariffs on Chinese products rising from us $50 billion to US $200 billion and then to US $300 billion. The future would be another $550 billion in taxes on goods.

September 1 marks the latest milestone in the massive trade war between China and the United States, which has escalated to the point where products traded between China and the United States are all-inclusive.

In such a grim situation, China's foreign trade furniture enterprises in the first half of this year's performance is quite considerable. As shown in the following table:

Business status of furniture foreign trade Company in the first half of 2019

The chart shows that furniture foreign trade enterprises basically adapt to the environment of the trade war between China and the United States. In the past six months, most of them have achieved amazing profit growth, among which zhejiang Yongqiang, Menghe, Henglin and Yongyi have seen a huge increase in profit, with the highest increase reaching about 922% and the lowest 91%. At the same time, the revenue growth of these companies is also considerable.

Of course, there are companies that have been negatively affected. Yihua Life, as the strongest furniture foreign trade company in 2018, has suffered the most negative impact this year. Operating income and net profit both fell sharply.

2. The same period of last year was greatly affected by the negative impact

Furniture foreign trade companies in the first half of last year by the negative impact or serious.

Here are the statistics for the first half of 2018:

Operating Status of the furniture foreign Trade Company in the first half of 2018

In the first half of 2018, the trade war between China and the US is still in the stage of publicity, and no actual tariff has been imposed, but it has caused great shock to the international community.

The above chart shows that although most of the six foreign trade companies' operating income is still increasing, their net profits have all dropped significantly. This has much to do with the fluctuation of the exchange rate of the international currency.

By the end of last year, the operating conditions of foreign trade companies were not optimistic:

Operating Status of furniture foreign Trade Company in 2018

The chart above shows that in the whole year of 2018, the revenue of most foreign trade companies increased considerably, but the net profit growth of most of them was weak, and the net profit of two large companies fell sharply. Zhejiang Yongqiang is more than 100 million huge loss.

Business figures for the first half of this year have been better than those before the trade

In the first half of this year, the operating conditions of most foreign trade furniture companies have improved substantially, so what changes have there been with the trade before the war, is it restorative growth?

The following chart is a statistical chart for the first half of 2017:

Business status of the furniture foreign trade Company in the first half of 2017

Since Zhongyuan Home Furnishand Henglin are listed late, the data are not complete. Only the operating data of the four companies in the first half of 2017 can be found.

Data showed that compared with the relevant data in the first half of this year, Xijiang Yongqiang's net profit increased from 250 million yuan to 356 million yuan; Dream Lily increased from 113 million yuan to 150 million yuan; Yongyi's shares rose to 91 million yuan from 66 million yuan. This suggests that their growth in the first half of this year was not just a recovery, but a significant improvement from pre-trade war levels.

Yihua Life is an exception, of course. Its net profit dropped dramatically from 470 million yuan in the first half of 2017 to 130 million yuan in the first half of this year.

From the perspective of operating revenue scale, compared with the first half of 2017, Zhejiang Yongqiang has slightly increased, Mengbaihe has increased by about 50%, Yihua Life has decreased by less than 600 million yuan, and Yongyi shares have increased from 800 million yuan to 1.1 billion yuan.

Operating status of four foreign-trade furniture companies in the first half of 2019

The trade war between China and the United States has been going on for more than a year. From the perspective of the operation of foreign-trade enterprises in the furniture industry, Chinese enterprises have not been crushed as expected by the United States. On the contrary, most of them have shown strong resilience.

Not only are most companies not weakened, some are already rearranging production lines in Southeast Asia and Europe, and adjusting strategies in overseas sales markets.

As classic economic theory says: No one wins a trade war. Even if flexible and strong as Chinese furniture enterprises, also have been seriously injured, with the strongest foreign trade yihua life suffered the most damage, is still in the stage of continuous blood loss. It remains to be seen whether the future will be as reversible as its peers.