A China trade war can definitely be the killer of this bull market. On the 30th of June we should hear the findings of China trade by the Trump Administration. The U.S. conventional trade has an outstanding balance with a yearly deficit of over $330 billion with China and then an estimated $550 billion deficit with the rest of the nations globally. Trump firmly believes tariffs are the answer. The majority of the trade issues are because of both Washington and corporate America. Those two entities and those involved have been leaning on low-labor and low tax areas since the beginning of the 1980s. Several of the companies with operations in China are weary of Trump’s belief. The are profiting close to $100 billion annually from China.
How Tariffs Will Affect The Market
Major retaliation on U.S companies who have ventured operations outside of the country will be a blow to the stock market. Large companies like Apple receive a large portion of their sales from China. A reduction in foreign sales will equate to less earnings are profits. In an extreme trade war, China will have an effect on commodity purchases, especially soybeans. Currently, the price to earnings ratio is high for the U.S. Reducing earnings will make these ratios lower. The S&P has been a strong contender, so far only dropping by 150 points since January, however, a trade war will be just the blow it needs to drop drastically. This war would chip away at the market on a global scale.
Ted Bauman Comments
Ted Bauman mentioned when you’re looking at these types of numbers regarding foreign income, there are sales surpluses globally. He also says that you should not want a trade war if you’re an investor in vulnerable multinationals. He says your interests depends on the companies themselves and not with their employees. Ted Bauman cautions, if the trade wars get out of control, its the capitalists that will get the immediate affect. Ted Bauman is the author of The Bauman Letter and he is one of lead people behind the Sovereign Investor Daily.
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