A US-China Trade War: Should Investors be Worried?

Friday, Jun 14 2019 by
1

The potential for the current tension between the United States and China developing into a full-fledged trade war seems to be increasingly likely in recent weeks. Some people believe the situation justifies the moniker of “trade war” already. Others feel it hasn’t quite reached that degree of severity. Either way, although this topic potentially affects many people in many different ways, investors in particular might be concerned about the impact a possible trade war will have on markets.

That doesn’t necessarily mean they should be. First, however, it’s important to review the basics of the situation as they are right now. Keep in mind, this is a dynamic conflict, and details are constantly changing. Investors need to stay abreast of the latest developments to fully understand their significance.

Understanding the Trade War

Hostilities began in 2017 when the US started investigating China’s trade policies and imposing new tariffs. At one point, when both countries agreed to stop imposing additional tariffs for a brief period, it appeared as though a deal may be struck. That unfortunately didn’t happen. In 2018, the US added more tariffs on greater than $250 billion worth of Chinese goods. China responded with its own new tariffs. This has yielded increased tension, with neither country appearing to give up much ground in the fight just yet.

The following image displays the recent developments in chart form:

euters Graphic

Image Source

In other words, it’s entirely understandable that investors might worry this escalating conflict will have substantial consequences. Two major economic powers locked in a trade war is rarely good news for the markets.

How the Fed May Help

Again, the above description isn’t meant to state that investor fears genuinely represent the future of the economy. Consider a recent statement made by Jerome H. Powell, the Federal Reserve chairman. On June 4, Powell, stated, “We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the US economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective.”

It’s important to understand that such a statement is by no means a confirmation that the Fed will be willing to cut interest rates in order to mitigate…

Unlock this article instantly by logging into your account

Don’t have an account? Register for free and we’ll get out your way

Disclaimer:  

As per our Terms of Use, Stockopedia is a financial news & data site, discussion forum and content aggregator. Our site should be used for educational & informational purposes only. We do not provide investment advice, recommendations or views as to whether an investment or strategy is suited to the investment needs of a specific individual. You should make your own decisions and seek independent professional advice before doing so. The author may own shares in any companies discussed, all opinions are his/her own & are general/impersonal. Remember: Shares can go down as well as up. Past performance is not a guide to future performance & investors may not get back the amount invested.


Do you like this Post?
Yes
No
1 thumb up
0 thumbs down
Share this post with friends



The Boeing Company is an aerospace firm. The Company operates in four segments: Commercial Airplanes (BCA); Defense, Space & Security (BDS); Global Services (BGS), and Boeing Capital (BCC). BCA segment develops, produces and markets commercial jet aircraft and provides fleet support services, principally to the commercial airline industry worldwide. BDS segment is engaged in the research, development, production and modification of manned and unmanned military aircraft and weapons systems for strike, surveillance and mobility. BGS segment provides services to commercial and defense customers worldwide. BCC's segment portfolio consists of equipment under operating leases, finance leases, notes and other receivables and assets held for sale. more »

LSE Price
$330
Change
 
Mkt Cap (£m)
163,175
P/E (fwd)
20.8
Yield (fwd)
2.6

Goodrich Petroleum Corporation is an independent oil and natural gas company. The Company is engaged in the exploration, development and production of oil and natural gas on properties primarily in Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend (TMS); Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend, and South Texas, which includes the Eagle Ford Shale Trend. It has interests in over 193 producing oil and natural gas wells located in over 43 fields in over eight states of the United States. It has estimated proved reserves of approximately 9.1 million barrels of oil equivalent (MMBoe), consisting of over 31.9 billion cubic feet (Bcf) of natural gas and approximately 3.8 million barrels (MMBbls) of oil and condensate. It also maintains ownership interests in acreage and wells in various other fields, including Longwood field in Caddo Parish, Louisiana and the Garfield Unit in Kalkaska County, Michigan. more »

ASQ Price
$9.97
Change
-3.2%
Mkt Cap (£m)
99.9
P/E (fwd)
6.5
Yield (fwd)
n/a

Amazon.com, Inc. offers a range of products and services through its Websites. The Company's products include merchandise and content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices. It operates through three segments: North America, International and Amazon Web Services (AWS). Its AWS products include analytics, Amazon Athena, Amazon CloudSearch, Amazon EMR, Amazon Elasticsearch Service, Amazon Kinesis, Amazon Managed Streaming for Apache Kafka, Amazon Redshift, Amazon QuickSight, AWS Data Pipeline, AWS Glue and AWS Lake Formation. AWS solutions include machine learning, analytics and data lakes, Internet of Things, serverless computing, containers, enterprise applications, and storage. In addition, the Company provides services, such as advertising. It also offers Amazon Prime, a membership program that includes free shipping, access to streaming of various of movies and television (TV) episodes. more »

NSQ Price
$1749.62
Change
-3.1%
Mkt Cap (£m)
704,944
P/E (fwd)
58.7
Yield (fwd)
n/a



  Is LON:BOE fundamentally strong or weak? Find out More »


Please subscribe to submit a comment






Stock Picking Tutorial Centre



Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis