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US-China Trade Tensions Re-Escalate: 7 Vulnerable ETF Areas

Sanghamitra Saha

The U.S.-China trade tensions flared up all over again with the Trump saying in a Sunday afternoon Twitter post that the current 10% tariffs on $200 billion worth of Chinese goods will jump to 25% on Friday. He also said to levy 25% levies on an extra $325 billion of Chinese goods “shortly,” per CNBC. Following the latest tweet, China is reportedly mulling over canceling this week’s trade negotiations.

Investors should note that President Donald Trump announced a delay in the increase of tariffs on about $200 billion worth of Chinese goods in late February, citing “substantial progress” in trade talks with Beijing.

A group of market watchers believe that Trump’s decision to more than double the tariff rate on $200 billion of goods was intended to warn China not to start negotiations with more “empty offers”, per CNBC.

Following are the ETF areas that are in the risk amid escalating trade tensions between the United States and China.

China & Asia

Chinese markets slumped more than 5% in the morning trading session of Monday, reacting to the U.S. threat. China ETFs like China A iShares MSCI ETF CNYA, CSOP FTSE China A50 ETF AFTY and Asia-Pacific ETFs like iShares MSCI Taiwan ETF (EWT) andiShares MSCI Hong Kong ETF (EWH) are likely to come under pressure.

Dow Jones & Industrials

Since the trade tensions would leave a significant negative impact on the industrial and manufacturing sector, such stocks may slump. SPDR Dow Jones Industrial Average ETF DIA and Industrial Select Sector SPDR ETF XLI may thus slip.

Global Markets (Mainly Emerging Asia)

U.S.-China trade spat was a bother for almost the entire world. The IMF had also previously cautioned that a full-scale trade war could impede global growth. All-world ETF iShares MSCI ACWI ETF ACWI and iShares MSCI Emerging Markets ETF EEM may also be in the red in the near term.

Semiconductor

U.S. chipmakers have the largest sales exposure to China. So, renewed tariff tensions with China could bring back pain in the semiconductor space.iShares PHLX Semiconductor ETF SOXX is thus in a vulnerable position.

Auto

U.S. auto companies earn about 12% revenues from China. With Beijing slamming tariffs on U.S. auto imports, First Trust NASDAQ Global Auto Index Fund CARZ would come under pressure (read: US-Sino Trade War Escalates: Most Vulnerable Sector ETFs).

Casino

U.S. casino companies like Wynn Resorts WYNN , Las Vegas Sands LVS and MGM Resorts International MGM have considerable exposure to China. The former two have respective revenue exposure of about 69% and 53% to China. Along with these stocks, casino gaming ETF VanEck Vectors Gaming ETF BJK should thus suffer.

Agriculture

Agricultural products like yellow and black soybean had faced retaliatory tariffs from China. Notably, China purchases about half of the U.S. soybean and is the second-largest buyer of American cotton. So, Teucrium Soybean ETF SOYB and the broader agriculture ETF Invesco DB Agriculture DBA may face risks (read: US Farm Belt at Risk on China Tariffs: ETFs in Focus).

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MGM Resorts International (MGM) : Free Stock Analysis Report
 
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
 
Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
 
SPDR Dow Jones Industrial Average ETF (DIA): ETF Research Reports
 
iShares PHLX Semiconductor ETF (SOXX): ETF Research Reports
 
Teucrium Soybean Fund (SOYB): ETF Research Reports
 
First Trust NASDAQ Global Auto Index Fund (CARZ): ETF Research Reports
 
iShares MSCI ACWI ETF (ACWI): ETF Research Reports
 
iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports
 
iShares MSCI Taiwan ETF (EWT): ETF Research Reports
 
iShares MSCI Hong Kong ETF (EWH): ETF Research Reports
 
Invesco DB Agriculture Fund (DBA): ETF Research Reports
 
VanEck Vectors Gaming ETF (BJK): ETF Research Reports
 
Industrial Select Sector SPDR Fund (XLI): ETF Research Reports
 
Apollo Senior Floating Rate Fund Inc. (AFT): ETF Research Reports
 
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