Global superpowers have started mulling over trade tensions starting March. The reason is Trump’s order to levy duties on steel and aluminum imports at the start of the month followed by his announcement to impose up to $60 billion in import duties on Chinese goods by Friday. Previously, Trump levied import tariffs on residential washing machines, as well as solar cells and modules too.
Mainly Chinese apparel, technology and telecom goods are being subjected to this tariff. China registered a $375-billion trade surplus with the United States in 2017 and the Trump administration is persistently forcing China to reduce that enormous amount by $100 billion.
No wonder, such moves would scale up global trade tensions. 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 Fears Rife: Likely ETF & Stock Winners and Losers).
Let’s take a look what the top U.S. exports to China are and which of these may come under pressure if Trump slams China with up to $60 billion in import duties.
Soybeans
China is likely to import 64% of global soybean this year. The two largest exporters of soybeans, Brazil and the United States, are likely to make up about 85% of the total global import demand. As per a document from 2013, soybeans are key U.S. exports to China. Needless to say, Teucrium Soybean Fund SOYB may face a retaliatory tariff.
Civilian Aircraft
Per that document, civilian aircraft comes second on the top-exporting list. Notably, China is a key market for Boeing Co (NYSE: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. So, aerospace ETFs like iShares U.S. Aerospace & Defense ETF (HM:ITA) could feel the brunt.
Cotton
U.S. cotton shipments nearly tripled to China, India, Indonesia and Pakistan last year. China is on the way to becoming the second largest U.S. market for cotton. This brings iPath Pure Beta Cotton ETN CTNN under the spotlight.
Copper Materials
China plays a key role in U.S. scrap exports. An estimated 31% of U.S. exports were supposed to go to mainland China in 2017. Although U.S. copper and copper alloy scrap exports to mainland China dropped in the fourth quarter of 2017 (down 10% year on year), shipments to China rose nearly 4% in 2017 as a whole, per sources. This puts iPath Pure Beta Copper ETN CUPM under focus.
Computer Chips
Mexico and China are the two top export markets for computer chips, making up 41% of the total. Now, it remains to be seen if the statistics can harm the soaring semiconductor segment or the fund iShares PHLX Semiconductor ETF SOXX.
Coal
China is one of the world’s biggest importers of coal. In the first seven months of 2017, Chinese coal imports from the United States were 4.03 million tons, “a figure already exceeding the full year total of 2.82 million for 2016 and 2.97 million for 2015.” So, investors should keep a tab on VanEck Vectors Coal ETF KOL (read: 5 ETFs That Deserve Honor on Presidents' Day).
Petroleum Gas
LNG is one the fastest-growing exports at the current level, up 68% in 2017 year over year. China falls in the top-three U.S. export markets with around 11% exposure. VanEck Vectors Unconventional Oil & Gas ETF FRAK thus needs to be watched closely.
Auto
Number of new passenger vehicles and light trucks that United States exported to China from 2011 to 2017 grew about 113%. One in 10 cars bought in China is likely to be a General Motors (NYSE:GM) despite China levying tariffs between 21% and 30% on American auto and the fact that foreign subsidiaries need to operate as 50-50 joint ventures with Chinese companies in the Mainland. So, some impact on the car industry could be seen, which puts First Trust NASDAQ Global Auto Index Fund CARZ under the spotlight (read: US Retail Sales Fall for 3 Straight Months: ETFs in Focus).
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The Boeing Company (BA): Free Stock Analysis Report
ISHARS-PHLX SEM (SOXX): ETF Research Reports
ISHARS-US AEROS (ITA): ETF Research Reports
VANECK-UNC O&G (FRAK): ETF Research Reports
TEUCRM-SOYBEAN (SOYB): ETF Research Reports
FT-NDQ GL AUTO (CARZ): ETF Research Reports
VANECK-COAL (KOL): ETF Research Reports
IPATH-PB COPPER (CUPM): ETF Research Reports
IPATH-PB COTTON (CTNN): ETF Research Reports
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