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Risk Assets Are Whipsawed amid Trade Friction and Syria Action


Nov. 20 2020, Updated 5:19 p.m. ET


In the world of finance, geopolitical risk is among the various risks that equity investors face. Looking at the current market situation, geopolitical tensions have driven equity markets over the last month. 

After imposing tariffs on steel and aluminum imports that targeted several countries, President Donald Trump discussed almost $150.0 billion in tariffs on Chinese goods. China has vowed retaliation and has already imposed tariffs on $3.0 billion of US goods. China has also readied its list of products—totaling almost $50.0 billion—related to potential retaliation if it is hit with US tariffs.

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US sanctions

The United States has also imposed sanctions against some Russian entities. One targeted company is RUSAL, which accounts for ~6.0% of global aluminum production. Commodities have been quite volatile this year amid the US-China trade war and escalating geopolitical tensions. 

The broader markets have also come under pressure, as the SPDR S&P 500 ETF (SPY) is down 0.24% so far in 2018 based on its April 13 closing price.

US steel and aluminum producers have also been whipsawed this year. Companies that were riding the Section 232 bandwagon—including U.S. Steel Corporation (X), Nucor (NUE), and AK Steel (AKS)—have pared their 2018 gains amid rising trade tensions. Alcoa (AA), the leading US-based aluminum producer, has recouped some of its 2018 losses after the sanctions on RUSAL boosted aluminum prices.

Series overview

In this series, we’ll look at the commodities that have been impacted by President Trump’s trade policies. We’ll also see what a US-China trade war could mean for US enterprises. Let’s begin by looking at the recent trend in aluminum prices.

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