1. How is the external demand exposure of various industries?
From the perspective of the proportion of overseas revenue of listed companies, since 2018, most industries have accelerated their overseas expansion, with the proportion of overseas revenue of listed companies increasing from 10.2% at the end of 2018 to 11.6% at the end of 2023.
In terms of industries, sectors such as electronics, home appliances, automobiles, machinery, and chemicals have a high degree of external dependence; among them, the external dependence of the electronics and communications sectors has significantly declined since 2018 due to the active decoupling from the United States, while mid-to-high-end products such as automobiles, beauty care, electric new energy, and machinery have quickly gone abroad.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1de4131f-7a0e-4e37-9fe3-81b5079537e2.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/1de4131f-7a0e-4e37-9fe3-81b5079537e2.png"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/fd72f9f2-3871-4b9e-a08c-f1d5b38e9b42.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/fd72f9f2-3871-4b9e-a08c-f1d5b38e9b42.png"/>
We further calculated the export exposure of listed companies in various industries to different countries using &#34;the proportion of overseas revenue of listed companies in the industry x the industry's export exposure to various countries,&#34; specifically looking at:
<ul>
<li>Industries that have seen a significant decline in export exposure to the U.S. in recent years and are currently at a low level include communications, media, semiconductors, military industry (military electronics, aviation equipment), and basic chemicals (rubber, chemical products, non-metallic materials, chemical fibers);</li>
<li>Industries that have seen a significant decline in export exposure to the U.S. in recent years but still have a high current exposure include consumer electronics and home appliances (lighting equipment, black electronics);</li>
<li>Industries that currently have high exposure to the U.S. and have been increasing in recent years include cultural and entertainment products, computer equipment, electrical equipment, beauty care (personal care products, cosmetics), and pharmaceuticals and biotechnology (medical devices, chemical pharmaceuticals).</li>
</ul>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3ac01656-8d82-46fc-8002-d1f97f3592b2.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3ac01656-8d82-46fc-8002-d1f97f3592b2.png"/>
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9a15d79d-b183-4dbb-b938-4bd3efba2aaf.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/9a15d79d-b183-4dbb-b938-4bd3efba2aaf.png"/>
<h2>2. How is the degree of export diversification in various industries?</h2>
After Tariff 1.0, China's export destinations have further diversified. Measuring the degree of export destination diversification by the proportion of exports to China's top three trading partners (the United States, EU28, ASEAN), it can be seen that since 2018, China has been seeking diversification in overseas markets. Even though there was some rebound due to the pandemic from 2020 to 2022, it is difficult to change the overall trend.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4cf3ee24-4772-462b-b86e-743ac0525b8f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4cf3ee24-4772-462b-b86e-743ac0525b8f.png"/>
By industry, most sectors have achieved diversification of export destinations since 2018. Among them, industries such as automobiles, media, non-ferrous metals, machinery equipment, steel, petroleum and petrochemicals, and building materials have seen a significant decrease in export concentration in recent years, and their current concentration is lower than the overall level (47.7%)
Among them, the exposure of industries such as oil and petrochemicals, media, steel, and non-ferrous metals to the U.S. has dropped to a low level.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/04fcd4d6-cde1-460b-9805-9a9d5326b580.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/04fcd4d6-cde1-460b-9805-9a9d5326b580.png"/>
In terms of subcategories, the export diversification characteristics of categories such as automobiles and their parts, construction machinery, metals, and chemicals are quite evident. On one hand, the export concentration is lower than the overall level (47.7%), and on the other hand, it has decreased significantly in recent years. Among them, the exposure of precious metals, chemical fibers, steel, and energy metals to the U.S. has dropped to a low level.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7bd34be5-cec5-4a8f-a36d-3ff5c66830b2.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7bd34be5-cec5-4a8f-a36d-3ff5c66830b2.png"/>
Although some categories still have a high export concentration currently, they have shown signs of diversification after Tariff 1.0. Typical representatives include certain home appliances (black electronics, small appliances), cosmetics, computer equipment, and packaging printing.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/20f93ad9-0cbe-4893-87e4-0cb30e109dd1.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/20f93ad9-0cbe-4893-87e4-0cb30e109dd1.png"/>
In addition, after Tariff 1.0, the export concentration has continued to increase, and the categories with further expanded exposure to the U.S. mainly include:
<ul>
<li>
<ol>
<li>Categories with a high dependence on China from the U.S. (over 30%), such as printed circuits and entertainment products;</li>
</ol>
</li>
<li>
<ol>
<li>Mid-to-high-end industrial products that China is rapidly gaining market share in globally, such as drones, batteries, and shipbuilding;</li>
</ol>
</li>
<li>
<ol>
<li>Some categories that are difficult to escape from single market dependence.</li>
</ol>
</li>
</ul>
For the first two types of goods, they may still maintain considerable competitiveness after the tariffs.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2e1948fe-e053-4508-aaff-3f9ed40865b2.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/2e1948fe-e053-4508-aaff-3f9ed40865b2.png"/>
3. Which sub-industries have a high export share and possess global pricing power?
For subcategories where domestic exports account for over 30% of the global market and have maintained stability or further increased their global market share after the 2018-2019 trade war, China is increasingly dominating the global export market, and the U.S. has a necessary import demand for these categories. This means that the U.S. may not be able to bypass China when importing these goods, even if it turns to other markets, the actual final source may still come from China, including light industry, batteries, textiles, and home appliances.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/79eac627-c0c7-4bc8-81ff-4baad21194e4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="Image" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/79eac627-c0c7-4bc8-81ff-4baad21194e4.png"/>
<h2>4. Which industries and products does the U.S. have a high dependence on imports from China?</h2>
Filter categories with large import scales from China to the United States and high dependence on China, mainly concentrated in consumer electronics, batteries, light industry for home use, and small appliances. Among them, the dependence on batteries and new metal materials has been continuously increasing in recent years.
<h2>V. What is the import substitution space for various sub-industries?</h2>
Currently, the subcategories in China that have a high dependence on global and U.S. imports are mainly concentrated in electronics (semiconductor components/devices, optical components), medical devices, machinery (measuring instruments, machine tools, cutting tools), aviation equipment, and chemical products. Among them, chemical products (cellulose, catalysts, composite reagents), aviation equipment, and medical devices have a large import exposure to the U.S.
<h2>VI. What is the layout of overseas production capacity in various industries?</h2>
With Trump's announcement to suspend plans to impose tariffs on other countries, the &#34;origin penetration&#34; principle provides better avoidance effects for directly laying out overseas production capacity. In response to the key regions in this round of global supply chain restructuring, namely Southeast Asia (based on statistics from Vietnam, Singapore, Thailand, Malaysia, and Indonesia), India, and Mexico, we systematically sorted through the announcements of listed companies that established subsidiaries/production bases overseas since 2010, and it can be seen that A-share listed companies have accelerated their pace of going overseas in recent years. Even though there were some disturbances in 2020-2021, it is difficult to change the overall trend.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a7feb69c-d901-44f1-8a70-dc9527709c77.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/a7feb69c-d901-44f1-8a70-dc9527709c77.png"/>
From the perspective of secondary industries, specialized machinery, consumer electronics, automotive parts, general equipment, electrical power equipment, and communication equipment currently have more sufficient overseas layout capacity, which may enhance their risk resistance in the future.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/54e2d0cf-a6e9-4b41-bb9c-bf2df443f559.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/54e2d0cf-a6e9-4b41-bb9c-bf2df443f559.png"/>
Author of this article: Zhang Qiyao from Industrial Securities, source: Yao Wang Hou Shi, original title: “【Industrial Securities Strategy Team Zhang Qiyao】Six Key Issues Regarding Tariff 2.0”
Risk Warning and Disclaimer
The market has risks, and investment should be cautious. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment based on this is at their own risk

This article analyzes six key issues of Tariff 2.0, mainly involving the external demand exposure and export diversification degree of various industries. Since 2018, the proportion of overseas revenue of listed companies has increased, with industries such as electronics, home appliances, and automobiles having a high degree of external dependence. Industries with a declining exposure to exports to the U.S. include telecommunications, media, and military industries, while industries such as automobiles and consumer electronics still maintain a high exposure to the U.S. In addition, China's export destinations are gradually diversifying, with a significant decrease in export concentration in industries such as automobiles, media, and steel

- Since 2018, the share of overseas revenue for listed companies in various industries has increased from 10.2% to 11.6% by the end of 2023, with high dependence in sectors like electronics and automotive.  
- Export diversification has improved, with a notable decrease in reliance on the U.S. for sectors such as telecommunications and chemicals, while industries like consumer electronics still maintain high exposure.  
- China is gaining global market dominance in exports of certain goods, particularly in consumer electronics and batteries, which the U.S. heavily relies on, indicating a complex interdependence in trade.

Six Key Questions About Tariff 2.0