Trade war fears and emerging market sell-offs have led to a risk-off sentiment in the last month. Risk assets like base metals have come under pressure this year. As for metals, concerns about China’s economic growth that were exacerbated by the trade spat with the United States have been pushing investors away. However, US markets are still running strong with the PowerShares QQQ ETF (QQQ) up 18.0% for the year based on September 11 closing prices.
The trade war was an offshore battle as the United States engaged with foreign governments ranging from NAFTA members to the European Union. However, even within the country, several companies that have been hit by President Trump’s tariffs started making murmurs about the tariffs. The murmurs got louder during second-quarter earnings calls as Trump’s steel and aluminum tariffs started to take a toll on downstream metal users’ profitability. Several companies have taken a hit on their earnings after Trump’s Section 232 tariffs lifted US steel prices and physical aluminum premiums to multiyear highs.
As Reuters reported, “After months of waging a behind-the-scenes war against President Donald Trump’s trade tariffs that have escalated far beyond what business groups once imagined, more than 60 U.S. industry groups are launching a coalition on Wednesday to take the fight public.” These groups include companies like Amazon (AMZN), Apple (AAPL), Walmart (WMT), and Alphabet (GOOG).
US companies have upped the ante as Trump has signaled that practically all Chinese imports will be slapped with tariffs. In the next article, we’ll see why tariffs against China are making US businesses anxious.