italyit
Trade war or skirmish?

Trade war or skirmish?

26-03-2018 | Visione

After a year of relative calm, Trump has started to act on his protectionist ideas. Although the risk of a trade war has risen, our global developed and emerging markets portfolios have little exposure to companies that would be affected directly.

  • Michiel  Plakman
    Michiel
    Plakman
    Portfoliomanager Robeco Global Stars Equities
  • Jaap  van der Hart
    Jaap
    van der Hart
    Equity Fund Manager

Speed read

  • Although the numbers are small, risks of a trade war have increased
  • This will be a negative overhang for global stock markets 
  • Little direct exposure in our global developed and emerging portfolios

The first of many

After imposing sanctions on solar panel imports last year – mainly aimed at Chinese solar panel manufacturers, the Trump administration has recently announced a rise in tariffs on aluminum and steel imports. More recently, he signed a memorandum announcing a new set of trade actions, invoking Section 301 of the 1974 Trade Act. Trump directed the US trade representative to levy tariffs on about USD 50 billion worth of Chinese imports following a seven-month investigation into intellectual property theft, which has been a longstanding point of contention in US-China trade relations.  

China reacted by announcing tariffs on USD 3 billion of imports from the US. In addition to the tariffs, the US plans to impose new investment restrictions, take action against China at the World Trade Organization and the Treasury Department will also propose measures. Before signing the measure, Trump lamented the US' multi-hundred billion dollar trade deficit with China and said the action would be “the first of many”.

Scopri gli ultimi approfondimenti
Scopri gli ultimi approfondimenti
Abbonati

Risks of a trade war have risen

Although so far the numbers are relatively small compared with the size of total trade, the actions by the Trump administration heighten the risk of retaliation by China and lead to increasing concerns about a global trade war that could destabilize the global economy. This would be a negative development for the US itself and its trading partners. As China is now specifically targeted, it would hurt them the most, together with other Asian exporting countries that are part of the China supply chain. For most Asian exporting countries, between 10% to 20% of exports is going to the US. We still have to see how this pans out. As China has indicated to be willing to open up the economy further and improve intellectual property protection, a trade deal remains a possible positive outcome. Still, risks have clearly increased.

We think that this will be an overhang for the global stock market for some time, even though the overall impact of the announced tariffs and measures on total trade between the US and China is relatively small. Clearly, Trump is signaling to the Chinese government – and to his constituents base - that he will do exactly as he promised on the campaign trail, so further measures cannot be ruled out.

Portfolio implications

Global Equity: little exposure
In our global high conviction strategy, we have little direct exposure to China, and few US companies with a lot of direct Chinese exposure. In the portfolio, we maintain a significant underweight in the US and an overweight position in Europe, for valuation reasons. For the long term, we actually think that Europe can benefit from increasing tensions between the US and China. However, in the shorter term, we think that increasing protectionism is negative for global trade, and will probably hurt everyone. As a consequence, this is clearly a negative for global markets, especially as it comes at a time of increasing global risks, due to the end of global monetary easing, and normalization of interest rates. Credit spreads are bound to rise, and the same holds for volatility, which is at all-time lows.

Emerging Markets Equity: few companies directly impacted
The impact on the emerging markets portfolios has been in line with the overall market movement. Only a few companies in the portfolio would be directly impacted to some degree by the announced measures. More important therefore is the overall impact on the economy and investor sentiment. For now, we believe that there are still large economic interests in the US and China that support open trade, so a further escalation into a trade war is not our base case scenario.

Gli argomenti collegati a questo articolo sono:
Logo

Disclaimer

Confermo di essere un cliente professionale

Le informazioni e le opinioni contenute in questa sezione del Sito cui sta accedendo sono destinate esclusivamente a Clienti Professionali come definiti dal Regolamento Consob n. 16190 del 29 ottobre 2007 (articolo 26 e Allegato 3) e dalla Direttiva CE n. 2004/39 (Allegato II), e sono concepite ad uso esclusivo di tali categorie di soggetti. Ne è vietata la divulgazione, anche solo parziale.

Al fine di accedere a tale sezione riservata, si prega di confermare di essere un  Cliente Professionale, declinando Robeco qualsivoglia responsabilità in caso di accesso effettuato da una persona che non sia un cliente professionale.

In ogni caso, le informazioni e le opinioni ivi contenute non costituiscono un'offerta o una sollecitazione all'investimento e non costituiscono una raccomandazione o consiglio, anche di carattere fiscale, o un'offerta, finalizzate all'investimento, e non devono in alcun caso essere interpretate come tali.

Prima di  ogni investimento, per una descrizione dettagliata delle caratteristiche, dei rischi e degli oneri connessi, si raccomanda di esaminare il Prospetto, i KIIDs delle classi autorizzate per la commercializzazione in Italia, la relazione annuale o semestrale e lo Statuto, disponibili sul presente Sito o presso i collocatori.
L’investimento in prodotti finanziari è soggetto a fluttuazioni, con conseguente variazione al rialzo o al ribasso dei prezzi, ed è possibile che non si riesca a recuperare l'importo originariamente investito.

Rifiuto