US-China Trade War: Who Could Be The Biggest Losers?

Remember that little situation boiling up between the two biggest economies on the planet?. That’s our focus today. We’re going to have a look at what’s going on with the US-China Trade War and its potential impact on several key sectors. After that, we’ll go through our usual roundup of the week’s hottest trading events, bitesize style.

US-China Trade War: A quick recap

You may recall that the US imposed tariffs on $250bn worth of Chinese products in 2018, in an attempt to encourage consumers to buy American, Beijing wasn’t too crazy about that and retaliated in kind.

To date, the US has imposed tariffs on a whopping $360bn of Chinese goods. China has retaliated, so far, with tariffs on more than $110bn of US products, with tariffs ranging from 5% to 25% on various goods.

A Moody’s Analytics report from September 2019 found that the trade war had already cost the US economy nearly 300,000 jobs and impacted GDP by around 0.3%. Bloomberg also estimated that the trade war would cost the US economy $316 billion by the end of 2020. Yikes!

Let’s take a closer look at that impact…

Tech

Chipmakers and electronics manufacturers that depend on China for sales, like NVIDIA Corp. (NVDA), Micron Technology (MU) and Intel Corp. (INTC), are looking pretty vulnerable right now.

On the flip-side, Apple (AAPL) is among the biggest and most prominent importers of goods assembled in China. The US behemoth has mostly avoided tariffs on its major products, so far.

In terms of software, things are looking more than a little dodgy for TikTok at the moment. Last week, President Trump stated that he intends to ban the popular short-form video app from operating in the US, rejecting a potential deal for Microsoft (MSFT) to buy the app from its Chinese-owned parent company.

Automobiles

It’s no secret, American carmakers sell most of their goods in the Chinese market. In 2018, China claimed that it would raise import tariffs from 15% to a gigantic 40% for all US automobiles. China has a booming auto sector, so this move wouldn’t bother them.

US electric automakers like Tesla Inc. (TSLA), would surely feel the pinch of such a move. Car part sellers would also lose out big-time.

Fortunately, the Chinese government has promised to suspend their auto tariffs as an act of goodwill following the US’ decision to delay tariffs on Chinese imports. But suspensions can easily be reversed, leaving this sector somewhat in the lurch.

Agriculture

China cut all imports of soybeans, lobster, corn, nuts, and other US farm products. American farmers are now struggling to find a replacement market for their goods and that’s led to a downturn in their productivity, directly affecting the US economy.

Energy

The US relies on imports of steel and aluminium to keep many of its core services running, using these metals to construct solar farms and oil pipelines. So, Trump’s proposed additional tax on Chinese aluminium and steel imports has already caused a bit of a shock to the US energy industry.

A lack of access to these raw materials will likely make clean energy projects more and more expensive. Such expenses will probably be passed onto the consumer, which may make them switch away from expensive clean energy to cheap, dirty sources. Not good.

So, big impacts all around! It’s a fascinating saga and you really can’t afford to take your eyes off it. Stay tuned to the news and especially the impact on these highly-important sectors.

Trading round-up

We recommend keeping an eye on the following events this week.

Monday

● The Bank of Japan will kick a relatively lively week off with their Annualised GDP Growth figures for Q1 (JPY).

● We’ll also get to hear a couple of US PMI updates, namely the Markit Manufacturing PMI Final and the ISM Manufacturing PMI (USD).

Tuesday

● Tuesday is (quite literally) all about watching out for the impact of the RBA’s Interest Rate Decision (AUD).

Wednesday

● We’ll get some important unemployment rate news from New Zealand (NZD).

● …and also hear Canada’s Balance of Trade figures for June (CAD).

Thursday

● The Bank of England is due to produce its latest Inflation Report and Interest Rate Decision (GBP).

Friday

● We’ll hear a couple of not-to-be-missed announcements concerning the state of Canada’s unemployment (CAD)

● Before finishing the week with a double-header if big ones, namely the US Non-Farm Payrolls and the US unemployment rate (USD)

That’s your lot! If this article floated your boat and you think your traders might be into something similar, get in touch with us today. We’ll be very happy to discuss your specific content needs and come up with a tailored solution to match your business.

Speak soon!

The Contentworks team