Wednesday, 02 August 2017 00:00

Alert: Trump May Take Trade Action Against China

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In what we think could become a major fear catalyst in markets, the Trump administration is reportedly considering trade actions against China. Trump’s team is said to be considering looking into launching a probe into China’s intellectual property practices. China currently has a rule forcing foreign companies operating there to put their intellectual property in locally-held subsidiaries. This policy has been a major tension point for western companies operating in China, and the move would be a sharp change of tone by Trump on China. Trump may use a long-sidelined US rule which allows the US to employ duties on foreign products if countries are using unfair trade practices.

FINSUM: This seems to be part of a broader plan to bring jobs back to the US as it may end in duties that would make American-made goods more competitive. We like the idea of getting tough on trade with China, but we do worry about short-term supply chain disruptions and their possible effects on markets.

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