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U.S. Trade Deficit With China Puts Education Stocks in Focus

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U.S.-China trade war has been a major damaging factor for financial markets since its commencement in July 2018. In fact, the constant tariff impositions affected the businesses of most industries in the two nations.

Chinese indexes have been heavily affected by the ongoing trade dispute, with Hang Seng Index (HSI) and Shanghai Composite Index (SCI) losing 11.4% and 5.4%, respectively, since Jul 6. The Dow Jones Industrial Average gained 2.6% and Nasdaq Composite lost 5.2%, respectively, in the same timeframe.

According to the U.S. Census Bureau, United States’ trade deficit with China increased 9.2% year over year to reach $38.6 billion in August 2018. Some of the country’s major imports from the Asian nation include consumer electronics, machinery and apparel.

President Donald Trump’s protectionist measures in trade with China were aimed at narrowing United State’s trade deficit that has been highest globally since 1975, but the broadening deficit indicates that a different approach would perhaps have been apt.

While most U.S. industries are experiencing a widening trade deficit with China, a few industries, such as education, have been barred from the trade war effect. Therefore, it would be prudent to focus on a few stocks from the U.S. education services industry at present.

U.S. Trade Surplus With China in Education

Although U.S.-China trade dispute is dominating global economic tensions, United States enjoys a trade surplus with China and rest of the world in the field of education. The Chinese education industry has been largely unaffected by the ongoing trade war as well.

As of 2016, U.S. education exports amounted to $39.4 billion while its imports were only $7.5 billion. Foreign students attending American higher education institutions were responsible for the trade surplus in education and remain a major driver for the continuing growth in the domestic education industry. The figure is indicative of only the tuition fee foreign students pay in the United States.

"A lot of Chinese students study in the US and pay large amounts of tuition fees and living expenses. This is a huge sum of money that flows from China to the US," China's central bank governor Yi Gang said at the G30 International Banking Seminar 2018 earlier in October.

Chinese students account for nearly 30% of foreign nationals enrolled in America’s educational institutions. The students not only contribute to the U.S. economy, but are also responsible for creation of jobs. According to NAFSA, during the 2016-2017 academic year, 1,078,822 foreign students studying in the United States were responsible for adding $36.9 billion to the U.S. economy and supported 450,000 jobs in the country.

According to Zion Market Research, U.S. education market is estimated to reach $2,040 billion by 2026. The industry is set to witness a compound annual rate of more than 4.5% in the2018-2026 period. The rising number of Chinese students enrolling for U.S. higher education could be a contributor to this growth.

Some of the leading players in U.S. education industry include Adobe Systems (ADBE - Free Report) , McGraw-Hill Education, Blackboard Inc. and Wall Family Enterprise.

Stocks in Focus

Here we present a few stocks from the U.S. education industry for your consideration.

K12 Inc. (LRN - Free Report) provides proprietary curriculum and educational services created for online delivery to students in kindergarten through 12th grade in United States. It is a technology-based education company. The company carries a Zacks Rank #1 (Strong Buy). K12’s earnings are expected to grow 11.7% this year and its year-to-date price performance is 34.6%.

Bridgepoint Education, Inc. (BPI - Free Report) provides postsecondary education services. It offers associate's, bachelor's, master's, and doctoral programs in the disciplines of business, education, psychology, social sciences and health sciences. Bridgepoint Education bears a Zacks Rank #2 (Buy) and its earnings could grow 8.4% in 2018. The company’s shares have gained 15.7% since January.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Grand Canyon Education, Inc. (LOPE - Free Report) is a regionally accredited provider of online postsecondary education services focused on offering graduate and undergraduate degree programs in its core disciplines of education, business, and healthcare. The company carries a Zacks Rank #3 (Hold) and its year-to-date price performance is 39.3%. Its earnings are estimated to grow 23.5% for the current year.

American Public Education, Inc. (APEI - Free Report) is an online provider of higher education focused primarily on serving the military and public service communities. The company’s shares have gained 30.6% since January. American Public Education carries a Zacks Rank #3 and its earnings are expected to grow 24% for 2018.

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