Displaying items by tag: tariffs
If one thing has been clear over the last couple of years, it is that US-China relations are getting worse. It started earlier in Trump’s term and has escalated in a tit-for-tat battle over the last couple years. Some refer to it as a great “uncoupling” while others say it is a new cold war. Whatever you call it, there are a handful of sectors that will do well as the situation unfolds. One such sector is automation and robotics companies. These companies are likely to do very well as US businesses are forced to re-shore manufacturing from China and seek out automation to make the return more economical.
FINSUM: A major decoupling will be a very ugly event. US companies do $500 bn of sales in China each year. The automation play makes sense. Check out the Robotics ETF (ROBO).
It has been more than 18 months of brinksmanship in the making, but the US and China are apparently set to seal a phase one trade deal. The deal will be signed at 11:30 am in the White House. The deal leaves out a lot of the most difficult and contentious issues between the countries, but is a sign that things are improving. The FT summarizes the substance of the deal this way, saying “It commits China to making $200bn in additional purchases of US goods, including farm products, and other pledges on currency and intellectual property, in exchange for a small rollback in some tariffs and an indefinite hold on further punitive measures out of Washington”.
FINSUM: The key thing here is that both countries want this work out and this deal is a step in the right direction. We find this quite positive in the grand scheme of things.
One asset manager called last year’s fourth quarter stock rout perfectly, and they are doubling down, saying it will happen again this year. Principal Global Investors’ Seema Shah says that stocks are facing another imminent selloff if the US and China can’t get a trade deal done before the December 15th tariff deadline. “If that trade deal doesn’t happen and if everything falls apart and it feels like tensions are getting worse, then I think we are facing a potential repeat of last year, and it will be worse”, said Shah. She says that the shock could be even bigger than in other parts of the year because of how liquidity disappears in December.
FINSUM: So we are dubious on this call, but what is interesting to us is that this argument was published on November 28th, and since then Trump has backtracked on the trade deal timeline.
Hedge fund icon Ray Dalio delivered a grim speech yesterday at a gala dinner for the National Committee on US-China Relations. The investor is worried about war in all it forms. He said that “There is a trade war, there is a technology war, there is a geopolitical war, and there could be a capital war”. Famed former US Secretary of State Henry Kissinger also spoke at the event and told both sides that they must avoid a shooting war at all costs, as no side can win.
FINSUM: Everyone on both sides will hopefully be somewhat relieved if a “phase one” trade deal can be reached.
Trump went on the record yesterday telling investors that the US and China were close to finalizing a trade deal. Markets were unconvinced. Speaking at the Economic Club of New York yesterday, Trump said “We’re close to a significant phase-one trade deal with China … It could happen soon, but we will only accept a deal if it’s good for the U.S. and our workers and our companies”. Markets held ground after the comments, but ultimately fell back as Trump offered little evidence to back up the comments of a deal being “close”.
FINSUM: In our view of this situation, a deal is never close to being done, it is perpetually on the edge of falling apart and only truly done when it is signed.