Global Economy: The Impact Of Double Tariff Policy Leads To The Amplification Of Global Pessimism

If the currently announced tariff policy is really implemented, the impact will be far greater than the impact of the last round of tariffs imposed by the United States only on China. It is estimated that the overall export decline in 2025 will reach 30-35%, the overall cotton consumption in 24/25 will shrink by 5%, and the overall cotton textile consumption will decline by 6.9%. For the cotton textile industry chain, it is bound to face another clearance, and rethink the positioning and competitive advantages of China's cotton textile industry chain. Risks and opportunities coexist. More thinking should be taken out of the short-term market and look at the consistency of the laws brought about by cycle change.

The United States has imposed tariffs on all countries, causing changes in the world trade order, increasing global pessimism, and even creating a liquidity crisis, The US has already imposed an average tariff of 19% on China (16.5% - 17.5% for cotton garments). After the tariff falls, the US tariff rate on China's cotton garments will exceed 70% (54%+16.5% - 17.5%). In addition, the abolition of the small package tax exemption policy in the United States also has a big impact on cotton clothing. Under the influence of the dual tariff policy, China's cotton textile downstream export consumption will suffer a big blow in the short term.

A Preliminary Measurement of the Impact of Tariff Policies on Export Consumption

Previously, we discussed the impact of separately levying tariffs on the downstream of China's cotton textile industry. The conclusion is that the impact was relatively large that year, and it will be resolved through entrepot and other means in the long run. Therefore, in the early stage when there was a separate levy of tariffs on China, we judged that it was more short-term sentiment that had a little impact, and the substantive impact had been basically affected by industrial price In.

However, the current tariff policy has undergone major changes. Generally, different levels of tariffs have been imposed on countries with trade deficits in the United States, which undoubtedly blocked the previously laid entrepot routes in the short term. It is difficult to quickly find other digestion routes to replace them at the moment. Therefore, we should carefully reassess the impact of this tariff policy.

We mainly look at the overall impact of the tariff on exports from three levels. First, we make statistical calculations according to the calendar year. First, from the perspective of the proportion of China's exports of American cotton textile products, it basically fluctuated around 10%, and this part of direct exports was directly hit. Referring to the data of 2018/19, the reduction brought by that time reached 20%. Second, for the part re exported from Southeast Asia, assuming that the volume exported to Southeast Asia is directly returned before 2018, the volume will be reduced by 34%. Third, it is a blow to the global economy. We see that under the background of the economic crisis, China has reduced the cotton textile products of all countries by 5-8%.

On the whole, from the statistics of the calendar year, assuming that the current announced tariffs actually landed, the overall export reduction in 2025 may reach 30-35%, more than the impact of the previous tariff attack.

If calculated from the perspective of cotton year, the overall result will be relatively optimistic, which is mainly due to the strong export of China's cotton textile products from September 2024, including some factors that compete for export. Therefore, from this perspective, the estimated export data of 2024/25 is relatively moderate, and the estimated reduction is 7.02%.

Estimation of China's consumption in 2024/25 under tariff policy

For China's cotton consumption in 2024/25, based on the background of 2018/19 market, we continue to revise 4-5% to calculate, and add the impact of export calculated previously. We estimate that the apparent consumption of cotton is about 7.4 million tons, the overall consumption of cotton textile products is down 6.9% year on year, and the proportion of exports is flat year on year.

From the perspective of the annual overall consumption reduction of cotton, it seems that the impact is not as great as expected, mainly because it is smoothed by the robust export consumption data from September 2024 to December 2025. It cannot be denied that the impact of the implementation of the tariff policy is far-reaching.

The world's trade pattern is changing. The direction from free trade to protectionist barriers has become an irreversible fact. We are more in awe of the unknown, and it is difficult to make accurate predictions. Here we will try to find some ways to interpret.

For the cotton textile industry, the upstream production is basically stable due to the protection of the national subsidy policy. If the weather conditions are acceptable, it may bring similar current production increase. The challenge facing the downstream is to win more and more rounds. Enterprises that survived the last round of tariff policy through entrepot will continue to find new ways in this round. First, continue to reduce profits and costs, downgrade from high-end fabrics to low end products, and compete with the Southeast Asian market for market share. Second, the shift to differentiated products such as blending also faces greater risks. Third, continue to develop the trade outlet of other countries' exports. Of course, in the short term, it is difficult for any new country to carry such a large consumption of the United States, which will certainly affect the digestion for a longer period of time. Fourth, the domestic cotton textile industry will experience another round of painful elimination, that is, clearing.

After clearing, with the decline of raw material prices, the overall industry cost will decline, which can smooth out the impact of some tariffs. At the same time, the absolute low price will stimulate the replenishment market at home and abroad, driving a new round of consumption growth. Prosperity will decline and extremes will turn against each other, which may be the fair existence of the cycle.

If the currently announced tariff policy is really implemented, the impact will be far greater than the impact of the last round of tariffs imposed by the United States only on China. It is estimated that the overall export decline in 2025 will reach 30-35%, the overall cotton consumption in 24/25 will shrink by 5%, and the overall cotton textile consumption will decline by 6.9%. For the cotton textile industry chain, it is bound to face another clearance, and rethink the positioning and competitive advantages of China's cotton textile industry chain. Risks and opportunities coexist. More thinking should be taken out of the short-term market and look at the consistency of the laws brought about by cycle change.