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Biden Hikes Tariff on Some Chinese Imports: ETFs to be Impacted
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On Tuesday, the Biden administration declared significant tariff hikes on $18 billion worth of Chinese imports to safeguard American industries from unfair competition. The new tariffs consider a wide array of products, with major impacts on sectors such as electric vehicles, solar energy, and steel.
The Biden administration highlighted overproduction and potential market flooding by Chinese manufacturers as the key reasons for these increased tariffs. The Biden administration seeks to restore global market stability and boost domestic production capacities in the United States. China sees the move as a part of the ongoing tough-on-China foreign policy.
Specific Tariff Adjustments
Electric Vehicles: Tariffs on imported Chinese electric vehicles will increase from 25% to 100%.
Solar Cells: The import tax on Chinese solar cells will rise from 25% to 50%.
Steel and Aluminum: Tariffs on certain Chinese steel and aluminum imports will see an increase from 7.5% to 25%.
Additional tariff adjustments include tripling the rates on lithium-ion batteries for electric vehicles and other uses and a 25% to 50% increase on Chinese semiconductors starting in 2025.
New Tariffs on Other Products
For the first time, tariffs will be imposed on Chinese imports of medical needles and syringes, and massive ship-to-shore cranes. Moreover, Chinese rubber medical gloves, and some respirators and face masks will face heightened tariff rates.
Impact on ETFs
First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) ) – Likely Gainer
The latest batch of increased tariffs should boost American production. The underlying Richard Bernstein Advisors American Industrial Renaissance Index of the fund AIRR measures the performance of small and mid-cap U.S. companies in the industrial and community banking sectors. The fund charges 70 bps in fees and yields 0.16% annually.
The Biden administration’s latest approach aims to support ongoing investments in American infrastructure and clean energy. The underlying NYSE FactSet U.S. Infrastructure Index of the fund IFRA comprises equities of U.S. companies that have infrastructure exposure and could benefit from a potential increase in domestic infrastructure activities. The fund charges 30 bps in fees and yields 1.77% annually.
White House believes Beijing’s subsidies are leading to overproduction of cheap clean energy products and electric vehicles. Hence, the curbs came into the EV space. But this EV ETF DRIV is heavy on the United States (54.1%), followed by Japan (11.9%), South Korea (5.3%) and Canada (5.0%). China has about just 3% exposure. Due to heavy exposure to the United States, this fund should not be impacted by the recent increase in tariffs.
The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund is mainly made up of U.S.-based chip stocks while some Dutch stocks have exposure to it. So, the fund should gain on the increased sales potential of underlying companies.
iShares U.S. Medical Devices ETF (IHI - Free Report) ) – Likely Gainer
The ETF seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Medical Equipment Index. Since it is a pure U.S. ETF and devoid of Chinese exposure, any import tariffs on Chinese medical equipment should not impact the fund negatively.
Invesco Solar ETF (TAN - Free Report) ) – Not Impacted Materially
The United States has 54.53% exposure to the fund while China has 16.68%. This means any import tariff on Chinese solar panels won’t hurt the fund that much. U.S.-based First Solar takes the top spot in the fund with about 12.47%, followed by U.S.-based Enphase Energy (9.02%) and U.S.-based Nextracker (7.23%).
The underlying Solactive Global Lithium Index tracks the performance of the largest and most liquid-listed companies that are active in the exploration and mining of Lithium or the production of Lithium batteries. The fund has 39.8% focus on China, while the United States has a lesser exposure at 18.9%.
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Biden Hikes Tariff on Some Chinese Imports: ETFs to be Impacted
On Tuesday, the Biden administration declared significant tariff hikes on $18 billion worth of Chinese imports to safeguard American industries from unfair competition. The new tariffs consider a wide array of products, with major impacts on sectors such as electric vehicles, solar energy, and steel.
The Biden administration highlighted overproduction and potential market flooding by Chinese manufacturers as the key reasons for these increased tariffs. The Biden administration seeks to restore global market stability and boost domestic production capacities in the United States. China sees the move as a part of the ongoing tough-on-China foreign policy.
Specific Tariff Adjustments
Electric Vehicles: Tariffs on imported Chinese electric vehicles will increase from 25% to 100%.
Solar Cells: The import tax on Chinese solar cells will rise from 25% to 50%.
Steel and Aluminum: Tariffs on certain Chinese steel and aluminum imports will see an increase from 7.5% to 25%.
Additional tariff adjustments include tripling the rates on lithium-ion batteries for electric vehicles and other uses and a 25% to 50% increase on Chinese semiconductors starting in 2025.
New Tariffs on Other Products
For the first time, tariffs will be imposed on Chinese imports of medical needles and syringes, and massive ship-to-shore cranes. Moreover, Chinese rubber medical gloves, and some respirators and face masks will face heightened tariff rates.
Impact on ETFs
First Trust RBA American Industrial Renaissance ETF (AIRR - Free Report) ) – Likely Gainer
The latest batch of increased tariffs should boost American production. The underlying Richard Bernstein Advisors American Industrial Renaissance Index of the fund AIRR measures the performance of small and mid-cap U.S. companies in the industrial and community banking sectors. The fund charges 70 bps in fees and yields 0.16% annually.
iShares U.S. Infrastructure ETF (IFRA - Free Report) ) – Likely Gainer
The Biden administration’s latest approach aims to support ongoing investments in American infrastructure and clean energy. The underlying NYSE FactSet U.S. Infrastructure Index of the fund IFRA comprises equities of U.S. companies that have infrastructure exposure and could benefit from a potential increase in domestic infrastructure activities. The fund charges 30 bps in fees and yields 1.77% annually.
Autonomous & Electric Vehicles ETF (DRIV - Free Report) ) – Likely Gainer
White House believes Beijing’s subsidies are leading to overproduction of cheap clean energy products and electric vehicles. Hence, the curbs came into the EV space. But this EV ETF DRIV is heavy on the United States (54.1%), followed by Japan (11.9%), South Korea (5.3%) and Canada (5.0%). China has about just 3% exposure. Due to heavy exposure to the United States, this fund should not be impacted by the recent increase in tariffs.
VanEck Semiconductor ETF (SMH - Free Report) ) – Likely Gainer
The underlying MVIS US Listed Semiconductor 25 Index tracks the overall performance of companies involved in semiconductor production and equipment. The fund is mainly made up of U.S.-based chip stocks while some Dutch stocks have exposure to it. So, the fund should gain on the increased sales potential of underlying companies.
iShares U.S. Medical Devices ETF (IHI - Free Report) ) – Likely Gainer
The ETF seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Medical Equipment Index. Since it is a pure U.S. ETF and devoid of Chinese exposure, any import tariffs on Chinese medical equipment should not impact the fund negatively.
Invesco Solar ETF (TAN - Free Report) ) – Not Impacted Materially
The United States has 54.53% exposure to the fund while China has 16.68%. This means any import tariff on Chinese solar panels won’t hurt the fund that much. U.S.-based First Solar takes the top spot in the fund with about 12.47%, followed by U.S.-based Enphase Energy (9.02%) and U.S.-based Nextracker (7.23%).
Lithium & Battery Tech ETF (LIT - Free Report) ) – Likely Loser
The underlying Solactive Global Lithium Index tracks the performance of the largest and most liquid-listed companies that are active in the exploration and mining of Lithium or the production of Lithium batteries. The fund has 39.8% focus on China, while the United States has a lesser exposure at 18.9%.