Product HS Code: 4004

Date: 3rd Mar’20

Details of findings of USA Trade with rest of world

Source- Trade Map (Trade statistics for international business development)

Statistics:

 USA represents 11.9% of World’s Exports for HS code 4004 as of 2018 world report
 Ranking in the World Exports stand at no. 2
 India stood as the biggest import market for USA accounting for ~17.5% of total
imports
 Total value of exports from USA stood at 28.66 Mn $

Analysis on Top Importing Countries:

Value wise Import % share

China ; 11.4
Mexico ; 13.3
Others; 27.7

Vietnam; 13.9

Canada ; 16.1 India ; 17.6

India Canada Vietnam Mexico China Others

Fig. 1: Percentage share of countries importing from USA

 Value exported Quantity
Country in 2018 (USD Share in USA's exports (%) exported
thousand) in 2018

World 28660 100 136460

India 5058 17.6 54827
Canada 4620 16.1 13570
Vietnam 3978 13.9 34539
Mexico 3816 13.3 5353
China 3273 11.4 7123
Others 7915 27.7 21048

Fig 2: Value and Quantity of Exports and country wise share

From Fig. 1 and Fig. 2 we can conclude:

 India imports the maximum in terms of value from USA, accounting for 17.6% of USA’s
total exports, with a value of 5.05Mn. $ of waste, parings and scrap of soft rubber and
powders and granules obtained therefrom
 Canada, which stands second imported 4.6Mn. $ from USA, accounting for 16.1% of
export
 We also find that interestingly though the quantity exported to Vietnam is much
greater than Canada but the revenue earned from Canada is much larger than that of
Vietnam. This helps us to conclude that the Canadian dollar is much lower w.r.t. to USA
dollar as compared to Vietnamese dong w.r.t. to USA dollar
 Similar are the results when compared with Mexican Peso and Chinese Renminbi
 Therefore, as an exporter from USA we will earn better if we export to countries like
Canada and Mexico, provided Total Landing Cost (TLC), bore by the importer in these
countries is lower than the other exporting countries
Tariff scenarios Analysis of Top 5 Importing Markets:

Average tariff (estimated)

Country faced by United States of
America (%)
India 10
Canada 0
Vietnam 3
Mexico 0
China 8

Fig. 3: Average Tariff Imposed on USA

To understand the consequences of Tariff, let us first consider the countries without tariff
imposed:

Fig 4: Demand and Supply curves of a country without Tariff

Herein,

DS: Domestic Supply

DD: Domestic Demand

P: Price of good at home

P*: World’s Price

At lower price, domestic consumers will consume Qw worth of goods, but because the home
country can only produce upto Qd, it must import Qw-Qd worth of goods

Fig. 5: Demand and Supply Curves with Tariff Imposed

Now, with Tariff imposed:

We understand that the total value of imported goods has risen from WS to WS+Tariff which
leads to increase in Price from P* to P1 and thereby limiting the volume of imports.

Domestic producers in the home country are encouraged thereby to produce more so Qd
moves towards right and also Qw moves left due to limit on imports.

Therefore, overall is a reduction in imports, increased domestic production and higher

consumer prices.
Consequently, concluding on Fig. 3:

 It would be preferable for the exporters from USA to trade with countries where the
tariffs imposed ~0%
 In the top 5 countries USA has better position with Canada and Mexico in these terms,
therefore these 2 counties may have chosen USA as a Most Favored Nation (MFN) for
this commodity
 Indian imposes a tariff of 10% which makes the total cost of HS 4004 rubber price to
increase. This is because Indian Government wants to incentivize the domestic
producers in the generation of scrap rubber
 Vietnam has imposed a lesser 3% tariff which will not increase the local prices as much
as the Indian Market

4th Mar’20

5 years Trade Analysis of Top 5 importing countries:

Growth in Exported Value and Quantity from 2014-2018

70
58
60
50
40 34
%change

28
30
20 10 9
10
0
-10 India Canada
-4 Viet Nam Mexico China
-11 -11 -7 -11
-20
Country

Growth in exported value between 2014-2018 (%, p.a.)

Growth in exported quantity between 2014-2018 (%, p.a.)

Fig. 6: Growth in exported value and quantity in Top 5 importing countries

 Growth in
Growth in exported exported
Country value between 2014- quantity
2018 (%, p.a.) between 2014-
2018 (%, p.a.)
India 34 58
Canada -4 -11
Viet Nam 10 28
Mexico -11 -7
China 9 -11

Fig. 7: Datasheet of growth in value and quantity

From the above we may conclude the following results:

 Canada and Mexico are the 2 countries that have witnessed a cut in both value and
quantity for imported waste, parings and scrap of soft rubber and powders and granules
obtained therefrom. Therefore, the potential of these 2 countries is decreasing with
time.

 India has witnessed a substantial rise of 34% in value and 58% in quantity imports rise
between these years. Therefore, India is importing from this commodity and USA should
focus on increasing the share in the Indian market in the coming years

 We also understand that strikingly though the quantity exported to China from USA
has decreased from 2014-2018 in double digit figures but value increase is received in
terms of revenue obtained for USA in this period. This shows that the China’s yuan has
actually depreciated between these times and yuan has become weaker w.r.t. US $.
This is beneficial for the exporters of USA who can leverage by increasing the trade
quantity to China

 We may also conclude that Vietnam imports are also increasing Y-O-Y basis and this
will be beneficial for the USA exporters again.

Therefore, to conclude from all the import analysis, taking into consideration all factors such as
tariffs, current market share, growth analysis we may conclude the following:
 Though India is showing a positive coefficient in terms of value and quantity of trade,
and the share it possesses currently but the Tariff of 10% imposes a potential problem
for the USA exporters who won’t get enough advantage than it would it was a MFN
country in terms of trade for HS 4004. Therefore, particularly for this commodity there is
a scope of further improvement of trade relations between the 2 countries in future

 We may also conclude that though the share of Canada and Mexico in terms of imports
from USA occupies 2nd and 4th position respectively and USA also enjoys 0% trade Tariff
between these countries still the picture is not rosy as there are drops in the trade
volume and value from these countries. Therefore, it becomes imperative to
understand does the actual consumption in these countries is actually decreasing or
there is a drop in these values due to more competition coming up in the market and
Canada and Mexico are getting better deals from these exporting markets

 China which currently imposes 8% tariff on HS 4004 on USA imported products sees a
drop in quantity of imported products from USA from 2014. This shows that the
market is getting decreased. Therefore, we need to analyze that this decrease is due to
competitive market creeping in or due to the depreciation of yuan w.r.t US $ and as a
result of which there is decrease in demand