Markets breathed a big sigh of relief at the G20 a few weeks ago when Trump announced that after meeting with Xi, China had agreed to return to the negotiating table with the US. This sent expectations surging that a trade deal between Washington and Beijing was within reach. However, all that hope seems to have been for nothing, as Trump and China are reportedly having trouble even making it back to the table because of being at odds over Huawei.
FINSUM: To be honest, we think the US and China are so at odds over trade that it is hard to imagine they will be able to resolve these tensions any time soon. Some are even saying this is going to be the Cold War 2.0.
The panic over Trump’s blacklisting of Huawei was reaching a fever pitch. The fall out had gotten so bad that it looks like the President decided to take a step back. Trump has now granted a three-month reprieve on the blacklist to give companies time to adjust. The stay is not a cancellation of the decision, just a window for adjustment. Huawei says it “doesn’t mean much”.
FINSUM: This is smarter than a sudden blanket ban as it will give a little adjustment period which may make it a bit easier for companies and markets to digest.
Make no mistake, the US’ new blacklisting of Huawei is going to have a serious effect on American tech companies. Huawei is deeply integrated with many US suppliers of technology components, so the import and export restrictions will be significant. Here is a lit of US companies with major relationships with Huawei: Qualcomm, Broadcom, Xilinx, Synopsys, Marvell Technology, Seagate Technology, Western Digital, Texas Instruments, and Micron technology.
FINSUM: The impact on the top and bottom lines of all these companies will take some time to figure out, but for now we thought it would be useful to know which ones are at risk.
President Trump has taken a flurry of brisk actions as part of the ongoing trade spat between China and the US. After hiking tariffs and considering more, Trump now officially took the step of effectively outlawing US business with Huawei. He issued an executive order that gives the Commerce secretary power to review any transactions that could pose a risk to national security. The US Department of Commerce also put Huawei on its “Entity List”, which means US companies will need to apply for a license before doing business with it.
FINSUM: To be completely honest we are quite worried about the implications of this trade war and how it could play out on many fronts. The trade war almost feels like a microcosm of the larger political and cultural leadership struggle between the US and China and that worries us.
The 2020 presidential election is still about a year and half away, yet a large number of investors have already made changes to their portfolios based on potential outcomes. Some 40% of investors say they have adjusted their portfolios because of the upcoming election, according to a recent survey. The reality is that investors are worried about a Democratic sweep of the presidency, House, and Senate, which could mean a serious rollback of Trump-era policies, including tax cuts. “If Biden continues to poll this well into the beginning of next year ahead of the primaries, he is gonna start to have some negative effect on the market”, says Tony Roth of Wilmington Trust.
FINSUM: We can’t help but agree with that last assessment. That said, we think negative effects will be slow and steady, not sharp moves.