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Trump to Slap $100B More Tariffs on China? Winners & Losers
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In the light of China’s “illicit trade practices,” President Trump had doubled down on China tariffs, ratcheting up possibilities of a US-China trade war. As uneasiness about trade policy spikes, almost all sectors are expected to suffer collateral damage.
But, utilities and telecoms may not have much to lose since these companies generate the least amount of revenues from China. In fact, small-caps from these sectors are fairly immune to the adverse effects because of their high domestic exposure in terms of revenue generation.
Trump Urges Additional Tariffs on Chinese Goods
Trump has ordered the U.S. Trade Representative to consider imposing tariffs on additional $100 billion in Chinese imports. The move threatened to jeopardize the efforts made by top U.S. and Chinese officials to stave off a full-blown trade war. Stock-index futures fell in response, with all major bourses moving south. After all, increased trade conflicts dent corporate profits and impede economic expansion.
This move is a continuation of trade disputes between the two countries that stretch back to the beginning of March. The Trump administration had announced tariffs on foreign steel and aluminum, eventually exempting nations like Canada and Mexico but not China.
Beijing retaliated by imposing 15-25% tariffs on $3-billion American goods like wine, nuts, dried fruits and frozen pork. In response to this, the United States again proposed tariffs on $50 billion of Chinese goods. To which, China hit back by levying 25% tariff on about $50 billion worth of U.S. imports, including soybeans, aircraft and automobiles.
Thus, it’s widely accepted that China may adopt a similar protectionist move like Trump and heighten global concerns of a tit-for-tat trade battle.
Which U.S. Exports Will Face the Hardest Blow?
Trade war concerns are rippling through farm states, which comprise a significant portion of Trump’s political base. The United States ships more than a third of its entire soybean crop to China. Thus, China imposing duty on the second-most valuable U.S. crop will hit farmers hard. Farm state Republican, Iowa Sens. Joni Ernst said that “there is a real danger that increased tariffs on U.S. exports will harm Iowa producers and undermine the rural economy.” Another Republican senator, Ben Sasse of Nebraska said that “the president threatening to light American agriculture on fire.”
China has specifically targeted short-haul commercial aircraft in response to United States’ imposition of tariffs on its airplanes. Chinese officials said that they will levy duties on planes that weigh between 15,000 and 45,000 kilograms, or 33,069 and 99,208 lbs such as the Boeing 737 narrow body family. Shares of The Boeing Company (BA - Free Report) took a beating since China is its biggest export market, while 737 is its highest selling product.
China is also a key market for electric car makers. As a result, tariffs on autos will negatively impact the likes of Tesla, Inc. (TSLA - Free Report) , Ford Motor Company (F - Free Report) and General Motors Company (GM - Free Report) . The latter, in particular, will be affected the most as China has been its largest retail market for six successive years. Lest we forget, last year, General Motors’ sales in China crossed the 4-million vehicle mark for the first time ever.
Sectors That Have the Maximum at Stake
The technology sector is positioned to lose the most in a US-China trade war. Almost 9.6% of the total revenues in the last 12 months of the technology sector came from China, per FactSet. China, thus, is the second-most important place for revenue generation for tech companies after the United States, which accounts for 50.8% of revenues. Individually, Intel Corporation (INTC - Free Report) could be affected the most, as the Dow component’s 22.9% revenues in the last 12 months came from China, according to FactSet.
Among other sectors with considerable exposure to China are Industrials, materials, energy, consumer staples, consumer discretionary, financials and healthcare that generate 4.4%, 3.6%, 3.5%, 2.8%, 2.1% and 1.8% of revenues from the country, respectively, per FactSet.
Likely Winners
Unlike the aforesaid sectors, utilities do not have much exposure to China, while the telecom sector has no exposure at all, per FactSet estimates. Stocks from these sector are, hence, least perturbed by a possible break out of a trade war. In fact, small-caps are expected to perform even better. And why not? These stocks have high domestic exposure in terms of revenue generation, which shields them from international disputes.
We have, thus, selected four small-caps from the winning sectors that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Utilities
Ameresco, Inc. (AMRC - Free Report) provides comprehensive energy services for businesses and organizations in North America. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 8.9% in the last 30 days. Ameresco has outperformed the broader industry in the past year (+108.9% vs -18.4%).
Global Water Resources, Inc. (GWRS - Free Report) , a water resource management company, owns, operates, and manages regulated water, wastewater, and recycled water utilities primarily in metropolitan Phoenix, Arizona. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 16.7% in the last 30 days. Global Water Resources has outperformed the broader industry in the last one-year period (+5.8% vs +4.2%).
Telecom
United States Cellular Corporation (USM - Free Report) provides wireless telecommunications services in the United States. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings climbed 31.3% in the last 30 days. United States Cellular has outperformed the broader industry in the last one-year period (+8.1% vs -10.2%). You can see the complete list of today’s Zacks #1 Rank stocks here.
SITO Mobile, Ltd. operates a mobile location-based advertising platform in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings moved up 30.6% in the last 30 days. SITO Mobile has outperformed the broader industry in the past year (+59.4% vs -10.2%).
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Trump to Slap $100B More Tariffs on China? Winners & Losers
In the light of China’s “illicit trade practices,” President Trump had doubled down on China tariffs, ratcheting up possibilities of a US-China trade war. As uneasiness about trade policy spikes, almost all sectors are expected to suffer collateral damage.
But, utilities and telecoms may not have much to lose since these companies generate the least amount of revenues from China. In fact, small-caps from these sectors are fairly immune to the adverse effects because of their high domestic exposure in terms of revenue generation.
Trump Urges Additional Tariffs on Chinese Goods
Trump has ordered the U.S. Trade Representative to consider imposing tariffs on additional $100 billion in Chinese imports. The move threatened to jeopardize the efforts made by top U.S. and Chinese officials to stave off a full-blown trade war. Stock-index futures fell in response, with all major bourses moving south. After all, increased trade conflicts dent corporate profits and impede economic expansion.
This move is a continuation of trade disputes between the two countries that stretch back to the beginning of March. The Trump administration had announced tariffs on foreign steel and aluminum, eventually exempting nations like Canada and Mexico but not China.
Beijing retaliated by imposing 15-25% tariffs on $3-billion American goods like wine, nuts, dried fruits and frozen pork. In response to this, the United States again proposed tariffs on $50 billion of Chinese goods. To which, China hit back by levying 25% tariff on about $50 billion worth of U.S. imports, including soybeans, aircraft and automobiles.
Thus, it’s widely accepted that China may adopt a similar protectionist move like Trump and heighten global concerns of a tit-for-tat trade battle.
Which U.S. Exports Will Face the Hardest Blow?
Trade war concerns are rippling through farm states, which comprise a significant portion of Trump’s political base. The United States ships more than a third of its entire soybean crop to China. Thus, China imposing duty on the second-most valuable U.S. crop will hit farmers hard. Farm state Republican, Iowa Sens. Joni Ernst said that “there is a real danger that increased tariffs on U.S. exports will harm Iowa producers and undermine the rural economy.” Another Republican senator, Ben Sasse of Nebraska said that “the president threatening to light American agriculture on fire.”
China has specifically targeted short-haul commercial aircraft in response to United States’ imposition of tariffs on its airplanes. Chinese officials said that they will levy duties on planes that weigh between 15,000 and 45,000 kilograms, or 33,069 and 99,208 lbs such as the Boeing 737 narrow body family. Shares of The Boeing Company (BA - Free Report) took a beating since China is its biggest export market, while 737 is its highest selling product.
China is also a key market for electric car makers. As a result, tariffs on autos will negatively impact the likes of Tesla, Inc. (TSLA - Free Report) , Ford Motor Company (F - Free Report) and General Motors Company (GM - Free Report) . The latter, in particular, will be affected the most as China has been its largest retail market for six successive years. Lest we forget, last year, General Motors’ sales in China crossed the 4-million vehicle mark for the first time ever.
Sectors That Have the Maximum at Stake
The technology sector is positioned to lose the most in a US-China trade war. Almost 9.6% of the total revenues in the last 12 months of the technology sector came from China, per FactSet. China, thus, is the second-most important place for revenue generation for tech companies after the United States, which accounts for 50.8% of revenues. Individually, Intel Corporation (INTC - Free Report) could be affected the most, as the Dow component’s 22.9% revenues in the last 12 months came from China, according to FactSet.
Among other sectors with considerable exposure to China are Industrials, materials, energy, consumer staples, consumer discretionary, financials and healthcare that generate 4.4%, 3.6%, 3.5%, 2.8%, 2.1% and 1.8% of revenues from the country, respectively, per FactSet.
Likely Winners
Unlike the aforesaid sectors, utilities do not have much exposure to China, while the telecom sector has no exposure at all, per FactSet estimates. Stocks from these sector are, hence, least perturbed by a possible break out of a trade war. In fact, small-caps are expected to perform even better. And why not? These stocks have high domestic exposure in terms of revenue generation, which shields them from international disputes.
We have, thus, selected four small-caps from the winning sectors that should make meaningful additions to your portfolio. These stocks flaunt a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Utilities
Ameresco, Inc. (AMRC - Free Report) provides comprehensive energy services for businesses and organizations in North America. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 8.9% in the last 30 days. Ameresco has outperformed the broader industry in the past year (+108.9% vs -18.4%).
Global Water Resources, Inc. (GWRS - Free Report) , a water resource management company, owns, operates, and manages regulated water, wastewater, and recycled water utilities primarily in metropolitan Phoenix, Arizona. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings rose 16.7% in the last 30 days. Global Water Resources has outperformed the broader industry in the last one-year period (+5.8% vs +4.2%).
Telecom
United States Cellular Corporation (USM - Free Report) provides wireless telecommunications services in the United States. The company has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings climbed 31.3% in the last 30 days. United States Cellular has outperformed the broader industry in the last one-year period (+8.1% vs -10.2%). You can see the complete list of today’s Zacks #1 Rank stocks here.
SITO Mobile, Ltd. operates a mobile location-based advertising platform in the United States. The company has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings moved up 30.6% in the last 30 days. SITO Mobile has outperformed the broader industry in the past year (+59.4% vs -10.2%).
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>