Trade War Fears Rife: Likely ETF & Stock Winners and Losers
Reinforcing his protectionist agenda, President Donald Trump sought to levy new tariffs worth up to $60 billion on China, according to Reuters. Mainly Chinese apparel, technology and telecom goods are being subjected to this tariff. This month, Trump has imposed a 25% tariff on steel imports and a 10% on aluminum imports. These tariffs are likely to push up costs and weigh on international sales of U.S. companies (read: 5 ETFs to Buy in March & Forget Trade War, Inflation Fears).
The Trump administration is also reportedly mulling over “imposing investment restrictions on Chinese companies over and above the heightened national security restrictions.”Needless to say, trade war fears are rife at the moment. Already, the European Union (EU) has threatened the United States of a tit-for-tat tariff on a range of consumer, agricultural and steel products. Now China could be the next in line to levy a retaliatory tariff (read: Trade War Talks Heat Up: ETFs & Stocks in Focus).
Naturally, companies that have extensive trade relations with China might face the brunt of a trade war. Technology chip suppliers selling products to manufacturers in China will also be dealt a heavy blow. In fact, Goldman Sachs compiled some companies with considerable revenue exposure to China.
Let’s take a look at those companies and the related ETFs.
Likely Stock and ETF Losers
Industrial
Boeing
China is a key market for Boeing Co BA where it serves as the largest exporter of America. Last September, the company said that it expects China to spend about $1.1 trillion over the next 20 years, purchasing more than 7,200 airplanes. The Chinese government has indicated that it might order Airbus in place of Boeing jets if the United States spoils its trade relation with China. Shares of Boeing fell 2.5% on Mar 14.
Industrial ETFs like iShares U.S. Aerospace & Defense ETF ITA, SPDR Dow Jones Industrial Average ETF DIA and Industrial Select Sector SPDR Fund XLI are highly invested in Boeing and could thus be hit hard.
Technology
Skyworks Solutions Inc SWKS
The company, which makes highly innovative analog semiconductors, has 85% revenue exposure to China, per Goldman, quoted on CNBC. The stock has moderate focus on ETFs like Global X Internet of Things Thematic ETF SNSR (around 6% weight) and iShares PHLX Semiconductor ETF SOXX (around 3.8% weight).
Qualcomm QCOM
The leader in 3G, 4G and next-generation wireless technologies has 69$ revenue exposure to China and has exposure in ETFs like SOXX (about 6%).
NVIDIA Corp NVDA
This semiconductor company is 56% related to China and is heavy on ETFs like Global X Robotics & Artificial Intelligence Thematic ETF BOTZ (about 9% focus) and SOXX (about 8% focus).
Other tech and semiconductor companies include Intel Corporation INTC, Micron Technology Inc. (MU), Applied Materials Inc. AMAT, Lam Research LRCX, Apple AAPL, Amphenol Corporation APH, which have sales exposure of 22% to 55%to China.
Consumer Discretionary
Wynn Resorts Ltd WYNN
This owner and operator of casino resorts has 64% exposure to China. The stock has around 5% focus on each of PowerShares Dynamic Leisure and Entertainment PEJ and VanEck Vectors Gaming ETF BJK.
Likely Stock & ETF Winners
Small-Cap Retail & Technology
Since Trump’s tariff plan will take consumer goods into consideration, small-cap apparel, footwear and toys companies are likely to benefit, which do not have much foreign exposure. PowerShares S&P SmallCap Consumer Discretionary Portfolio PSCD might gain in the days ahead.As far as small-cap apparel and shoe companies are concerned, the likes of Stage Stores Inc. SSI, Boot Barn Holdings Inc. BOOT and Xcel Brands Inc (XELB) may benefit from the import tariff.
There is a small-cap technology ETF for investors, namely, PowerShares S&P SmallCap Information Technology Portfolio PSCT. As far as stocks are concerned, Comtech Telecommunications Corp. CMTL and Stoneridge Inc. SRI are some of the companies one may consider.
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Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
Skyworks Solutions, Inc. (SWKS) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Comtech Telecommunications Corp. (CMTL) : Free Stock Analysis Report
Boeing Company (The) (BA) : Free Stock Analysis Report
Stoneridge, Inc. (SRI) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Amphenol Corporation (APH) : Free Stock Analysis Report
SPDR-DJ IND AVG (DIA): ETF Research Reports
SPDR-INDU SELS (XLI): ETF Research Reports
ISHARS-PHLX SEM (SOXX): ETF Research Reports
PWRSH-SP SC IT (PSCT): ETF Research Reports
ISHARS-US AEROS (ITA): ETF Research Reports
PACIFIC (EX: JA (PEJ): ETF Research Reports
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