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Ebbing Trade Tensions Could Lift Chip ETFs

This article was originally published on ETFTrends.com.

Few sectors have been plagued by the trade dispute between the U.S. and China like technology has been. Among technology exchange traded funds, semiconductor funds have incurred significant damages as the world's two biggest economies have hurled trade barbs at each other.

For example, President Donald Trump has pushed for restrictions on trade barriers with China, which might pose a threat to the sector. China is a key market for the global semiconductor industry, consuming more than $100 billion worth of semiconductors or roughly one-third of the world population.

The VanEck Vectors Semiconductor ETF (SMH) and the iShares PHLX Semiconductor ETF (SOXX) have been drubbed by the US/China trade dispute, but perked up on Tuesday.

“The $787 million VanEck Vectors Semiconductor ETF, known by its ticker SMH, and the $1.2 billion iShares PHLX Semiconductor ETF, ticker SOXX, both were up more than 1.5 percent in afternoon trading on speculation that the U.S. and China are making headway on trade,” reports Bloomberg.

Trade Talks

The jitters in the country’s markets could put China in a precarious position if trade wars persist with the United States, However, a white paper published by China last month revealed that the country can economically withstand the effects of a long, drawn-out trade war between the two economic superpowers, but it took extra measures for preparation when the Chinese central bank cut the amount of reserves held by banks.

However, those jitters could be easing as President Trump and Chinese President Xi Jinping are expected to meet at the G-20 summit next week.

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The easing tension between the two, especially over trade talks, could help reduce the murky outlook on semiconductors that plagued the sector when investors and observers considered the ramification of increased trade barriers.

Chip companies are deeply enmeshed in some of the world’s most complex supply chains, making them particularly vulnerable to trade disputes. The stocks have been going through a rough patch recently, in part due to the ongoing tiff between the U.S. and China,” according to Bloomberg.

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