Displaying items by tag: tariffs

(Beijing)

With the US-led tariffs battle in full swing, Americans tend to focus on how such tariffs are affecting our own country. However, to understand how things may play out, we need to see what is happening on the other side. While US markets have taken a shallow hit from the potential trade war, Chinese shares are plummeting, and a very near to a bear market. Both the country’s Shanghai and Shenzhen indexes are at almost a 19% loss from their peak in January, just a hair off the 20% loss that qualifies as a bear market. According to one Chinese securities analyst, “It’s mainly the trade war that has created such panic in the market because the latest developments have surpassed the expectations of many people in China”.

FINSUM: We wonder how much this kind of market pressure will compel the Chinese government to give in to some of the US’ demands? The counter point to that view is that since the country is not a democracy, the government doesn’t really have to worry all that much if people are upset. That is a very blunt view of the situation, but one we think is fundamentally true.

(Washington)

Despite lots of hopes that a US-led trade war would never come to pass, it is now happening. The US has just imposed $50 bn worth of tariffs on China, which is an escalation of previous metal tariffs, and appears to be a major step towards starting a global trade war. With that in mind, how can one protect their portfolio? While almost all sectors are affected by a trade war, the worst ones will be industrials, autos, and meat producers. Auto companies are likely to be hit very hard by tariffs, so it is best to stay away.

FINSUM: The other thing the market does not seem to be taking into account is that tariffs seem likely to increase US inflation, as companies tend to pass along the increase cost of production onto consumers. That could be an additional downside risk, but one potentially offset by the chance of recession.

(Washington)

A week ago it didn’t seem like it was going to happen, but nonetheless it is. Trump plans to move ahead with imposing $50 bn worth of tariffs on China starting as soon as tomorrow. The move is expected to bring heavy retaliation from Beijing. Several days ago, China made a conciliatory offer to boost purchases of US goods by tens of billions of Dollars.

FINSUM: We think the US’ approach to link the trade situation to working with China on North Korea is not a very smart angle, as nuclear security and agricultural goods don’t sit comfortably.

(Beijing)

It looks like Trump’s efforts to put pressure on China over trade might be paying off. In what we think looks like a significant concession, Beijing has just offered to buy an extra $70 bn of US goods if Trump agrees not to impose the tariffs he has threatened. Trump has said he wants China to cut its trade surplus with the US by $200 bn. The $70 bn would mostly go to US agricultural products, energy, and manufactured goods.

FINSUM: China just made an offer that amounts to over 33% of what Trump demanded. That seems like a pretty good step.

(Washington)

You know that Mercedes or BMW you have sitting in your driveway? Kiss it goodbye, maybe. In a move that seems likely to cause as much consternation at home as abroad, President Trump is planning a broad ban on German luxury cars. Trump’s proposals have ranged from a 25% tariff on German cars (extremely heavy) to outright bans. He reportedly told French leader Emmanuel Macron that he would maintain his trade policy until “no Mercedes models rolled on Fifth Avenue in New York”.

FINSUM: BMW alone makes $8-9 bn in annual revenue from sales of cars in the US. If Trump wanted to start a bitter trade war, this would be a good first step. Americans aren’t going to like this one either.