Trump hikes tariffs on the Chinese imports
On May 5, President Donald Trump surprised the world with a tweet suggesting a hike in tariffs on Chinese imports into the US. In his tweet, Trump clearly warned that the 10% tariff imposed by the US on $200 billion worth Chinese goods “will go up to 25% on Friday.” Trump kept his promise, as “U.S. Customs and Border Protection imposed the new 25 percent duty on affected US-bound cargoes leaving China after 12:01 a.m. EST” today,” Reuters reported.
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US and Chinese companies
The technology and consumer discretionary sectors have been some of the worst-affected sectors this week so far. Among US tech companies, Apple (AAPL), NVIDIA (NVDA), Qualcomm (QCOM), Intel (INTC), and Micron (MU) have been some of the worst performers with falls of 5.2%, 7.0%, 6.2%, 9.9%, and 9.4%, respectively, this week so far. A prolonged US-China trade war is likely to badly hurt the iPhone maker’s and US chipmakers’ business in the long run.
During the same period, Chinese companies Tencent Holdings (TCEHY), Baidu (BIDU), JD.com (JD), HUYA (HUYA), and Alibaba (BABA) have lost about 4.1%, 5.0%, 8.5%, 5.3%, and 8.3%, respectively. Most of these companies except the Chinese e-commerce giant Alibaba have limited exposure to the US market. Nonetheless, these Chinese companies may not remain immune to the broader market sell-off.
Investors on the ropes
In the last year, America’s trade tensions with Europe, Canada, and especially China have taken a big toll on investors’ sentiments. Investors’ concerns about the global trade war have sent tremors to the world stock markets, including the US indexes, on multiple occasions.
For instance, the US-China trade war was one of the key factors that triggered a massive sell-off in the fourth quarter of 2018. Similarly, after Trump’s tariff hike warnings to China, the NASDAQ Composite Index turned negative after ending the previous six weeks in the green territory.
These massive week-to-date losses in both American as well as Chinese companies make it clear that the ongoing trade tussle between the US and China is likely to keep investors from both countries on the ropes.