International Trade Friction, Short-Term Domestic Cotton Price Is Expected To Be Under Pressure

International trade frictions have further escalated, and the authoritative agencies have lowered their global economic growth expectations. International cotton prices may be under pressure.

The United States announced that it will impose reciprocal tariffs on all trade partners on April 2. It is expected that more countries will take countermeasures against the United States, which will further worsen the international trade environment, increase the cost of commodity imports, and further shrink consumer demand.

In the middle and late March, the authoritative institutions successively lowered the global economic growth forecast. The OECD lowered the global economic growth forecast for 2025 from 3.3% to 3.1%, and the international rating agency Fitch lowered it from 2.6% to 2.3%.

In the cotton market, after China imposed a 15% tariff on American cotton, the contracted volume of American cotton exports has declined significantly recently, and it is expected that the shipment volume of American cotton exports will also shrink in the later period, which will drag down the pressure operation of international cotton prices.

In addition, the US Department of Agriculture will announce the intended area of US cotton in 2025 at the end of March. In February, the U.S. Department of Agriculture predicted that the cotton planting area in the United States would decrease by 10.6% to 10 million acres in 2025 year on year, and the National Cotton Federation predicted that the cotton planting area would decrease by 14.5% to 9.56 million acres year on year. It is expected that the general trend of the cotton planting area in the United States would be difficult to change. Considering that the current US cotton price continues to be depressed, whether the US cotton planting area will decline more than previously expected needs close attention.

The effect of the policy of expanding domestic demand will gradually appear, the monetary easing policy will be moderately advanced, and the domestic cotton price trend will be cautious and optimistic. Driven by the domestic consumption promotion policy, Guangdong Province issued the Implementation Opinions on Further Promoting the High Quality Development of the Textile and Clothing Industry, and Shanghai included home textile products in the scope of consumer goods subsidies.

According to merchants, since the implementation of home textile subsidies, the unit price can basically increase by about 5%. On March 21, the first quarter meeting of the central bank studied the main ideas of monetary policy in the next stage, put forward suggestions to increase the intensity of monetary policy regulation, improve the foresight, pertinence and effectiveness of monetary policy regulation, and cut the reserve ratio and interest rate at the right time according to the economic and financial situation at home and abroad and the operation of financial markets.

In terms of the cotton market, the spring planting of cotton in China is about to start, and the price of agricultural materials in Xinjiang has risen. It is expected that the cost of cotton planting will increase in 2025.

In the textile market, the cotton yarn sales continued to enjoy a small profit promotion recently, and the yarn shipment was relatively smooth, so there was no large-scale stock accumulation. Considering the implementation of consumption promotion policies, the promotion of monetary easing policies, the rise of agricultural materials prices and the low pressure on cotton yarn inventory, the short-term domestic cotton price is expected to be cautiously optimistic.