For the last several weeks, the on-again, off-again threat of trade war with China has been pushing and pulling the market.
In the latest development, earlier this week President Donald Trump says he is “ready” to place tariffs on every Chinese good imported to the U.S. Speaking with CNBC Friday morning, Trump said “I’m ready to go to 500,” referring to the $505.5 billion in Chinese imports the U.S. took in last year. Currently, the Trump administration has only put tariffs on $34 billion worth of Chinese products. China imports just under $130 billion in U.S. products each year, according to the Census Bureau.
According to Fortune, the escalation in the trade dispute has been rapid so far. The first round of tariffs between the two countries went into effect on July 6 and less than a week later Trump began thinking about expanding them, considering adding tariffs of 10% on $200 billion worth of Chinese exports. This week was the first time, though, Trump has talked about a full-scale trade war.
The first round of tariffs largely applied to raw materials imported by American companies. Only about 1% of the items on the list were consumer goods. The items under consideration that were announced on July 11 would have a more direct impact on consumers, though. Among the items targeted would be fish, luggage, tires, dog leashes, baseball gloves, furniture, clothing, mattresses, and some electronics.
AAII Weekly Survey Question
Having the two largest economies in the world going toe-to-toe is bound to put markets on edge and a full-blown trade war would almost certainly create significant global economic headwinds. To see if our readers are making changes to their portfolios in light of that threat, last week’s survey question asked:
Have you made any changes to your portfolio in anticipation of an all-out trade war between the U.S. and China?
Here are the results:
In all, 1,703 readers participated.
Overwhelmingly, 89% of our readers have not made changes to their investment portfolios in anticipation of a U.S-China trade war. Only 11% of respondents have made any changes given this threat.
Weekly Special Question
While most of our readers haven’t made any changes to the portfolio given the threat of a trade war between the U.S. and China, we were curious to know what adjustments were being made, if they were. So last week’s special question asked:
What changes, if any, have you made to your investment portfolio or strategy in anticipation of a U.S.-China trade war?
In all, we received 282 responses.
Given the results of our weekly survey, it is not surprising that most of the responses indicated the reader has not made any changes to their portfolio or investment strategy. Of those who responded, roughly a quarter (26%) indicated they have altered their investment portfolio or strategy in anticipation of a U.S.-China trade war.
Among these responses, here is how they broke down:
- 22% are moving money away from Asian investments
- 14% are buying more bonds
- 9% are scaling back their equity holdings
- 8% are buying more U.S.-based companies
- 8% are buying more small-cap stocks, which tend to not have as much international exposure
- 7% view a trade war as a buying opportunity
Here is a sampling of the responses we received as to whether readers are adjusting their investment portfolios or strategies in case of a U.S.-China trade war:
- “‘This too shall pass.’ I am invested for the long haul.”
- “A few of my China positions hit their stop loss, so I sold them.”
- “Bought some positions undervalued by the disruption and sold some positions that I believe will suffer in the longer term.”
- “Buying U.S. company stocks.”
- “Increasing my cash position.”
- “I have never invested in Chinese companies. I only invest in U.S.-based companies.”
- “Slightly more focused on mid- and small-caps that are less sensitive to a trade war due to more business here in the States.”
- “Postponed purchasing additional equities until trade policy affects on markets becomes clearer.”
- “No changes yet, but I am nervous.”
Everybody has an opinion! Why not give us yours? Participate in our weekly member poll, updated every Monday, and see the results online at www.aaii.com/memberquestion.