U.S. markets closed

U.S.-Japan Signs Limited Trade Deal: 3 Winners

Zacks Equity Research

The United States and Japan finally take a step forward to ease trade issues prevailing since President Trump opted out from the Trans-Pacific Partnership and imposed higher tariffs on Japanese auto.

The limited deal signed as a sideline to the United Nations General Assembly in New York will reduce Japanese tariffs on beef, pork and agricultural products, while removing tariffs on digital commerce completely. America, on the other hand, will be reducing tariffs on machines, bicycles and more goods from Japan. The deal will be effective in January with further trade deal talks beginning in the first quarter of 2020.

“Tremendous Trade Deal” Signed

On Sep 25, the U.S. President and Japanese prime minister Shinzo Abe signed a partial trade deal at the U.S. Chamber of Commerce. As per the agreement, Japan will reduce tariffs on beef and pork as well as eliminate staged tariffs on cheeses, processed pork, poultry, beef offal, ethanol, wine, frozen potatoes, oranges, fresh cherries, egg products and tomato paste.

This deal has definitely brought relief to U.S. farmers who were having a hard-time due to the U.S.-China trade war. The deal has a country-specific import quota for wheat and wheat products but will remove tariffs on almonds, walnuts, blueberries, cranberries, sweet corn, grain sorghum and broccoli, immediately.

Further, tariffs will be completely removed on digital commerce that includes digitally traded videos, music and software, and open doors to data flows between the two countries for free as well as prevent data localization requirements.

In 2018, Japan, the forth-largest goods trading partners of America, had been hurt by Trump’s higher tariff imposition on Japanese automobiles and parts. Japan was in a rift with the United States since Trump opted out of the Trans-Pacific Partnership in the beginning of his term.

On signing this deal, the U.S. Trade Representative Robert Lighthizer also offered reassurance that no additional tariffs will be charged on Japanese automobile or auto parts. Further, as part of the deal, the United States has agreed to cut import duties on Japanese goods that include turbines, machine tools, bicycles, green tea, cut flowers and musical instruments.

This partial deal will be effective from January and negotiations on bigger trade deal will start after April 2020. American farmers have been suffering huge losses for a long time as its biggest agricultural importer, China, had halted imports. This deal will shower some relief on them.

3 Winning Stocks

This U.S.-Japan limited trade deal seems to be a bonus for the farmers. Though this deal will not reap high benefits as the Trans-Pacific Partnership would for farmers and ranchers, it will definitely benefit them.

Here are three agricultural and meat product stocks that flaunt a Zacks Rank #1(Strong Buy) and have outperformed their respective sub-industries. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bunge Limited BG is a publicly traded farm-to-consumer food chain company that processes, produces, moves, distributes and markets agricultural products globally. Bunge’s expected earnings growth rate for the current year is 33.1%, above the industry’s estimate of 11.6%. The Zacks Consensus Estimate for current-year earnings has improved 27.9% over the past 60 days.

The company has registered an earnings growth of 8.2% in the past six-month period.

Pilgrim's Pride Corporation PPC is a publicly traded fresh chicken retail line that sells chicken. Pilgrim Pride’s expected earnings growth rate for the current year is 53.9%, higher the industry’s estimate of 20.7%. The Zacks Consensus Estimate for current-year earnings has improved 7.7% over the past 60 days.

The company has outperformed the Food – Meat Products industry over the past one-year period (+79.4% vs + 30.9%).

IndustriasBachoco, S.A.B. de C.V. IBA is a global publicly traded producer and distributor of eggs, pork and balanced feed. IndustriasBachoco’s expected earnings growth rate for the next year is 13%, which is the industry’s estimate of 10.6%. The Zacks Consensus Estimate for current-year earnings has improved 8.1% over the past 60 days.

The company has outperformed the Food – Meat Products industry over the past one-month period (+0.5% vs -0.6%).

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.     

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.  

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
Bunge Limited (BG) : Free Stock Analysis Report
Industrias Bachoco, S.A. de C.V. (IBA) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research