What Do Trump’s Tariffs Mean For The Market?

&l;p&g;&l;img class=&q;dam-image ap size-large wp-image-27f4f927aa554de79a692090bc048191&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/27f4f927aa554de79a692090bc048191/960×0.jpg?fit=scale&q; data-height=&q;639&q; data-width=&q;960&q;&g; President Donald Trump speaks before signing a Presidential Memorandum imposing tariffs and investment restrictions on China, in the Diplomatic Reception Room of the White House, Thursday, March 22, 2018, in Washington. From left, Trump, Secretary of Commerce Wilbur Ross, United States Trade Representative Robert Lighthizer, and White House homeland security adviser Tom Bossert. (AP Photo/Evan Vucci)

Now that President Donald Trump is actually instituting trade sanctions on China what are the implications for the stock market?

We&a;rsquo;ve all seen the increased volatility and the large daily drops in the major indices. Will this spark another correction? Will this be what breaks the 9-year bull market and brings on the much anticipated bear market?

Is a trade war on the horizon? The Trump Administration plans to impose tariffs on $50 billion to $60 billion of Chinese imports, lodge a dispute with the World Trade Organization over China&a;rsquo;s technology licensing, and restrict China&a;rsquo;s investment in strategic industries and technologies. Even with a 25% tariff rate, S&a;amp;P Global ratings said the impact on Chinese corporations and banks will be contained.

So far China&a;rsquo;s response has been measured. Maybe that&a;rsquo;s because the U.S. only represents about 15% of China&a;rsquo;s exports. Still, China has said it may put tariffs on about $3 billion of U.S. imports.

According to S&a;amp;P, aerospace and defense may have the most to lose. &a;ldquo;Boeing (BA) could lose long-term business to it&a;rsquo;s key competitor, Airbus,&a;rdquo; said S&a;amp;P. In 2017, about 23% of Boeing&a;rsquo;s commercial aircraft deliveries went to Chinese airlines or delivery companies and it makes up about the same percentage of Boeing&a;rsquo;s backlog, said S&a;amp;P.&l;span&g;&a;nbsp; &l;/span&g;

China could hurt the agricultural sector by putting a tariff on soybeans. But S&a;amp;P this would probably hurt independent farmers more than agribusiness companies such as Archer Daniels Midland (ADM), Bunge (BG), &l;span&g;&a;nbsp;&l;/span&g;and Cargill.

S&a;amp;P said the tariffs would probably have little impact on the building materials sector as very few export to China and only 20% rely on Chinese exports. There would also be very little impact on the auto sector. Financial companies would also not feel much of an affect.


It would be a negative for the chemical and petrochemical industries as China is the largest chemical market in the world. But, U.S. capital goods companies have modest exposure to imports and investments from China, said S&a;amp;P.&l;span&g;&a;nbsp; &l;/span&g;The tariffs may hurt U.S. media companies importing films into China. However, the effects on oil and gas companies would be muted.

Consumer products would be the main companies affected by the tariffs.

&a;ldquo;U.S. companies that outsource to China for apparel, toys and other consumer goods could be feeling vulnerable,&a;rdquo; said S&a;amp;P. The U.S. toy industry could be hit hard as most toys are manufactured in China.

U.S. retailers could also see margin pressures as they receive a lot of goods from China and will try to pass the costs onto their customers.

In the technology sector, &a;ldquo;U.S. buyers will have to pay more,&a;rdquo; said S&a;amp;P as &a;ldquo;the tariffs will probably not reduce sales because there are no immediate alternatives to the assembly capacity in China.&a;rdquo;

Telecommunications and utilities in the U.S. will probably not be affected.




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