lunes, 25 de junio de 2018

lunes, junio 25, 2018

The Trade War’s First Casualties

Investors are likely to get hit before the U.S. and Chinese economies feel the pain, meaning the trade feud could escalate

By Justin Lahart



SOY LOSS
Soybean near-month futures

Source: FactSet


With their escalating trade feud showing little evidence of hurting their economies, the U.S. and China aren’t close to backing down. Investors may get squeezed between the two giants before one of them cracks.

The U.S. has already put tariffs on steel and aluminum and will add a 25% tariff on $50 billion in Chinese imports starting next month. China is matching the U.S. tariff for tariff. These actions have sent U.S. steel prices higher and U.S. soybean prices lower. But the broader economic effects so far appear negligible.

That could change soon. The administration is set to announce restrictions on Chinese investments in the U.S. next week, and Mr. Trump has threatened to retaliate against China’s retaliation and put tariffs on more godos

The administration thinks that China has more to lose in this dispute, since China runs a big trade surplus with the U.S. The real issue isn’t who has more to lose, but how long each side can bear the pain. This is where it could get dangerous for investors. Worries about what could come next weighed heavily on shares of companies that depend on China for business, such as Caterpillar and Boeing , last week.
The next round of tariffs against China, if it comes, will likely hit consumer goods. As a result, it won’t affect just Chinese producers, but also U.S. retailers (if they absorb the cost increases) or U.S. consumers (if the price increases get passed on). This is particularly true for the many goods dominated by Chinese production, such as cellphones and footwear, where the ability to find other sources is limited. A lot of those China-made goods are produced by U.S. multinationals, so they, and their investors, will share in the pain.






China could also make things difficult for U.S. multinationals by stepping up regulations against them or encouraging Chinese consumers to avoid their products. And it has ways to blunt the impact of U.S. trade actions, such as supporting affected Chinese exporters and lowering the value of its currency.

China’s leaders may not back down until there are serious economic or social consequences from the trade fight. The government has the ability to control the Chinese stock market, and leaders don’t have to worry about elections. The White House does have to pay attention to the stock market, since sharp declines inevitably stoke economic fears. And it has midterm elections coming up.

Until one of those tripwires gets hit, the trade fight could get more pitched, leaving investors to absorb the blows. It could be an interesting summer.

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