Trump is following through on a long-time threat that he says will punish China for intellectual property infringement and create more American jobs. [Effective this Friday,] the Trump administration…[will be] imposing tariffs on up to $60bn of Chinese goods, or roughly 13% of goods imported from China…and 2.75% of total US goods imported according to Danske Bank. The tariffs will target tech products, telecoms & clothing. The package could be applied to more than 100 products, which Trump argues were developed by using trade secrets the Chinese stole from U.S. companies or forced them to hand over in exchange for market access. In addition, the Administration has discussed rescinding licenses for Chinese businesses and employing other such methods to restrict Chinese investment in the United States. The President's recent decision to block a Singaporean company's bid to takeover a U.S. company underscores his aversion to Chinese direct investment (the company had Chinese affiliations). The Administration has also reportedly discussed visa restrictions and a mandate that U.S. stock exchanges limit who can list in a U.S. market. It remains unclear whether the restrictions will go this far, but the President has, to date, been hawkish in his trade policy and there seem to be fewer and fewer moderating voices in the White House. 
In terms of specifics, the U.S. trade deficit last year hit an all time high of $375BN. 
A snapshot of the key aspect of the U.S.-China trade relationship: - the U.S. exports soybeans, pharmaceuticals, vehicles and aircraft.
- the U.S. imports textiles, clothing, manufactures of metals, electronics and toys.
The Chinese will likely respond in kind The Chinese will likely respond in kind, beginning a succession of tit-for-tat trade policies between the two countries. The United States has the option to take a multilateral approach and work with allied nations to initiate their own WTO dispute regarding Chinese technology transfer policies, however, at this point, the U.S. appears more likely to instead take unilateral retaliatory action without WTO authorization, which may run afoul of the U.S.'s WTO obligations. If the U.S. acts unilaterally (as it appears it will), China will likely bring a challenge before the World Trade Organization (WTO). The President's actions may not receive the congressional backlash that his steel and aluminum tariffs did. Many U.S. corporations are frustrated with China's policy requiring foreign companies to turn over source code and other proprietary technology in exchange for access to the Chinese market. However, if the President takes this as far as he currently seems to be planning to, punitive measures by China coupled with the chilling of foreign investment could be a major concern for U.S. corporations. How to trade it? …Below, courtesy of Strategas, is a list of U.S. companies which derive the largest percentage of their total revenue from China. 
As trade war looms, it would be prudent for investors to start thinking about potential risks to the companies they own if they have sufficient business in China. Scroll to very bottom of page & add your comments on this article. We want to share what you have to say! Related Articles From the munKNEE Vault: 1. Tariffs: What Are They & How Do They Impact the Economy & Your Investments? President Trump recently announced new tariffs on imports of steel and aluminum, in a move that got mixed reviews from business and political leaders. The new tariffs would increase levies on aluminum by 10% and steel by 25%. There is much debate about the sensibility of these tariffs, but rather than wade into that morass, let's examine what tariffs are and how they impact the economy and your investments. 2. These 4 Canadian Steel & Aluminum Stocks Seem Safe From U.S. Tariffs On March 1, 2018, the Trump administration announced a 25% tariff on steel and a 10% tariff on aluminum. The orders now exempt Canada and Mexico from the tariffs, with possible exemptions for Australia and other U.S. allies to come. If NAFTA negotiations are unsatisfactory, Trump may alter or remove any exemptions. The Canadian steel stocks and aluminum stocks on our list today have not experienced significant changes in their stock prices…[and,] due to the decision by the United States, these companies could see a sudden market response. 3. Imposing Tariffs to Remedy U.S. Trade Deficit: Trump's Instincts Valid BUT Many are criticizing the Donald for imposing tariffs on some commodities such as steel and aluminum but, while he has a valid argument for his thinking, our overall trade deficit is unlikely to change. Indeed, it can not change without a serious economic depression and collapse. Let me explain why that is the case. 4. What an America First Trade Policy Could Mean for the US Dollar Are the actions being taken by Trump's administration to spur domestic manufacturing, jobs and economic output a precursor to a weaker dollar and another bull market in gold? Only time will tell, but investors should keep close watch on this developing scenario and adjust portfolios accordingly. 5. Trump's Planned Protectionist Measures Would Hurt the U.S. Dollar Since the 1990s, currency traders have consistently sold off the U.S. dollar at each occasion the U.S. adopted protectionist measures. 6. The Trump Trade Doctrine IS NOT the Answer ? A New Financial System IS The Trump Trade Doctrine wants to fix the trade imbalances which America runs with many of its trading counterparts (like China, Mexico, India, etc.) but this is nearly impossible without a return to a settlement mechanism like a gold standard or a gold exchange standard. For all the latest ? and best ? financial articles sign up (in the top right corner) for your free bi-weekly Market Intelligence Report newsletter (see sample here) or visit our Facebook page. The post U.S. To Impose A Package of $60 Billion In Annual Tariffs Against China This Friday appeared first on munKNEE dot.com. |
