Sinolink: Trump's presidency has a relatively small direct impact on the chemical industry, with multiple layers of buffering for indirect effects.

Sinolink released a research report stating that when looking at the sorting of chemical materials, only a few varieties of additives, pesticides, polyurethanes, etc., exported to the United States account for more than 10% of the total domestic production, while the majority of products have an export proportion of less than 1%. The systemic advantages of domestic chemical manufacturing in China are obvious, and the competitiveness of Chinese products continues. Indirect supply or market substitution will further reduce the impact of tariffs. Therefore, from a broad perspective, the results of the US presidential election may have a certain emotional impact on a very small number of products, but the marginal impact has been weakened, and in the long term, the indirect impact will be more controllable. Event Introduction On November 6, the final results of the US presidential election were announced, with Trump winning. According to his campaign speech, he may cancel China's most favored nation status, impose a comprehensive 60% or higher tariff on Chinese goods, support fossil fuels, encourage domestic fossil energy extraction, and have an obvious adjustment in the international Brent crude oil market. Sinolink's main points are as follows: After experiencing multiple rounds of tariff increases in 2018-2019, the proportion of China's chemical products directly exported to the US has been gradually declining. Since 2018, the US has imposed tariffs on Chinese products exported to the US four times, directly affecting the products exported from China to the US, particularly in the chemical industry. In 2017, China's chemical industrial and related products exported to the US accounted for 12.18% of the total exports, but after two years of tariff policy impact, this proportion decreased to 11.58% in 2020, and by 2023, it had further decreased to 8.29%. The impact of the US on chemical product exports has significantly decreased due to previous policy effects, and countries like South Korea, Brazil, and Russia have become good alternatives. If the tariff rates increase in the future, the impact on China's direct exports of chemical products to the US has significantly decreased, and the marginal impact is gradually weakening. China's systemic advantage in chemical manufacturing is obvious, and the competitiveness of Chinese products continues. Indirect supply or market substitution will further reduce the impact of tariffs. China's competitive advantage in the chemical industry is not only based on policies and demographic dividends but also on systemic advantages such as industrial chain, market capacity, scale construction, execution efficiency, and production support. In terms of global market competition, China still has a clear advantage in markets outside the US. With the construction of processing bases domestically and overseas, domestic products can further form a global supply chain through final exports. Moreover, as global trade becomes more abundant, market substitution can further reduce the impact of point-to-point tariffs, eventually bringing multiple layers of buffering to the upstream chemical industry. For example, if there are risks for domestically produced tires to export to the US market, the market share in Europe may increase further. If the anti-dumping and countervailing policies remain in their current form, considering that leading enterprises have already set up overseas bases for exports to the US, the impact on leading enterprises will be minimal. If tariffs are imposed on Southeast Asian bases or targeted at enterprises with Chinese backgrounds, the risks for enterprises with high export proportions to the US will be relatively greater. Considering the increasing purchasing power of the US dollar and the expected trend of consumer downgrading in Europe, the cost-effectiveness advantage of domestically produced tires as export products will be further highlighted. The implementation of tariffs still faces great uncertainty, and there are still many conditions for the local industrial chain supply to be met. As one of the world's most important manufacturing hubs, China's targeted and widespread tariff increases will significantly increase the consumption costs of existing products. A tariff of over 60% will have a significant impact on the US consumer market, and taking into account the current production capacity and efficiency in the US, enterprises will need a longer time for development strategy adjustments, market research, planning, procedures, project approvals, capacity building, etc. If the policy direction changes in the long run, there will be risks of prolonged competitive pressures on products. It is difficult to estimate the ideal proportion for effective supply replacement, and there are many uncertain factors concerning whether the content of the election speech can actually be enforced. There have been expectations for changes in the trend of fossil energy, and enhancing extraction requires both funds and time. From an energy perspective, on the one hand, the increased exploitation of fossil energy has been anticipated by the market, and the Brent crude oil price has already adjusted to a certain extent; on the other hand, increasing extraction requires funds and time. Therefore, when facing a situation where international new energy development is more significant, enterprise decisions should not only consider policy directions but also consider the long-term return on investment. In the short term, there may be some impact on the price of petrochemical energy, but there is no need to be overly pessimistic. Risk warnings: risks of overcapacity in production supply, risks of policy changes, risks of drastic fluctuations in energy prices, etc.