Trump administration trade deals are opening opportunities for investors as bilateral agreements are reached with Japan, Great Britain and Canada, despite China balking at further opening its market, ending its theft of U.S. intellectual property and stopping the forced transfer of technology from U.S. companies.
Top investment experts have found stocks and funds that should benefit from the trade deals that have been agreed to thus far and not hurt much by the fallout of the faltering U.S.-China trade negotiations. Even if China is trying to drag out the trade talks until after the next U.S. presidential election in hopes a weak negotiator is elected, the Trump administration still is achieving progress with its more receptive trade partners.
“I consider myself a purist on trade, as I think governments should not be in the business of erecting exchange barriers between individuals,” said Jim Woods, editor of Successful Investing and Intelligence Report. “If a trade deal with Japan, Great Britain and Canada gets done, that is an aggregate positive for the all nations, as well as the global economy.”
Woods favors stocks in Canada over Japan and Great Britain, simply because that country has the best economic outlook going forward. He specifically likes the benchmark Canada exchange-traded fund (ETF), the iShares MSCI Canada ETF (EWC), to gain exposure to the country’s equity market. Moreover, that fund has slightly outpaced the SPDR S&P 500 ETF (SPY) in terms of total return year to date.
“Asia is a lot more than China,” said New York-based money manager Hilary Kramer, who has notched eight straight profitable trades for an average of 12 percent per position after the recent launch of her 2-Day Trader advisory service. “The Trump administration recognizes that the products that came from Chinese factories can just as easily be sourced to traditional regional allies like Taiwan, South Korea or Japan, as well as countries like Vietnam, India and Indonesia where we have emerging relationships. That’s where new trade treaties can make a huge difference.”
Examples of products that easily could be manufactured in Asian nations other than China include clothing and shoes, said Kramer, who also heads the Value Authority, GameChangers, Turbo Trader, High Octane Trader and Inner Circle advisory services. Even though retail stocks such as Walmart (NYSE:WMT) and apparel brands like Nike (NYSE:NKE) may seem vulnerable to the trade dispute with China that led President Trump to order U.S. companies to seek business opportunities elsewhere, clothes and shoes also come from Vietnam, Indonesia and all over the continent, Kramer said.
“As trade walls rise around Beijing, these alternative supply centers become much more attractive,” Kramer said. “In this space, I think Under Armour (NYSE:UA) is extremely interesting. The brand is still growing worldwide, it’s on the verge of returning to profitability and the clothes come from Vietnam. China risk is already off the table.”
Investment columnist Paul Dykewicz interviewing money manager Hilary Kramer
In the technology sector, Apple (NASDAQ:AAPL) has problems that go deeper than its supply chain, but that chain can go through Taiwan exclusively whenever CEO Tim Cook wants to do so, Kramer said.
Foxconn is a Taiwanese company that previously did quite a bit of business on mainland China but has started pulling operations back home. That’s a boon for the entire Taiwanese tech industry, Kramer said. She expressed interest in looking at Taiwan Semiconductor Manufacturing (NYSE:TSM), ASE Technology Holding Co. (NYSE:ASX) and especially AU Optronics (NYSE:AUO), which remains on the shortlist for selling Apple the next generation of iPhone screens.
“That would be a huge announcement for what’s now only a $2 billion company,” Kramer told me.
Kramer also warned to steer clear of Flex Ltd. (NASDAQ:FLEX), which fell 4 percent on Aug. 27.
“It’s getting into a messy legal war with Huawei that won’t end well for anyone,” Kramer said. “That’s what happens when long-standing relationships fall apart.”
Of course, when new business relationships emerge, the transition period can be “chaotic and uncertain,” Kramer said. As a solution, Kramer said she started her 2-Day Trader service to help individual investors profit even while the market has been trapped in a 4 percent whipsaw… up one week, down the next, with little pattern from day to day.
“That’s where short-term options trades really shine,” Kramer said. “We’ve made money on defensive sectors and then turned around and effectively shorted those same sectors when the market mood improves. When volatility picks up or recedes, we can make money there, too. Every time we call the direction right adds up.”
Trump Administration Trade Deals Leave China on the Sidelines
Both President Trump and Vice President Pence have remained adamant that the United States needs to remedy problems with existing trade relationships, and they are insistent on not accepting any agreement just to strike a deal that does not serve U.S. interests. The United States and its partners in Europe, Japan and elsewhere claim China’s plans to subsidize domestic companies developing electric cars, robotics and other technologies violate its obligation to open its market.
Meanwhile, China has become increasingly aggressive in its demands on other countries. Examples include its disputed ownership claim of islands in the South China Sea, its threats against Taiwan, stern warnings to freedom-seeking protestors in Hong Kong and Vietnam and seeking to sanction U.S. defense companies that sell military jets to Taiwan.
“We put China on notice that the era of economic surrender is over,” Vice President Mike Pence said Aug. 19 during his speech to the Economic Club of Detroit. Vice President Pence reminded attendees at his noontime speech in Detroit that the United States agreed to give China open access to America’s economy 17 years ago by allowing it to join the World Trade Organization (WTO) but leaders of the world’s most populous country have not reciprocated in kind.
Protecting American Jobs Guides Trump Administration Trade Deals
By “standing strong” in addressing trade imbalance and structural issues with China, the Trump administration is seeking to protect American jobs and prosperity for generations to come, Pence said.
Previous U.S. administrations of both main political parties agreed to accept China into the WTO in hopes the Asian nation would expand freedom in all of its forms if other markets were opened to the Communist country, Pence said. But those hopes have not been fulfilled economically or politically, with respect for the rule of law, private property, personal liberty and religious freedom, Pence continued.
“We hoped to see an expansion of the entire family of human rights in China,” Pence said. “But over the past 17 years, we haven’t seen it. In fact, the Chinese Communist Party has used an arsenal of policies inconsistent with free and fair trade — policies like tariffs and quotas, currency manipulation, forced technology transfer, intellectual property theft and industrial subsidies — all the while not becoming a freer society but actually, in so many ways, moving China in the opposite direction.”
Vice President Pence spoke at the Economic Club of Detroit last week.
China’s $500 Billion Surplus with United States Affects Trump Trade Talks
The policies China has implemented helped build Beijing’s manufacturing base, but saddled America with a $500 billion annual trade deficit and hundreds of billions of dollars in further intellectual property theft every year, Pence said.
“But as I stand before you today here at the Detroit Economic Club, know this: Under President Donald Trump’s leadership, those days are over,” Pence said.
The Trump administration put tariffs on $250 billion in Chinese goods and announced additional tariffs that will take effect soon, Pence told attendees. President Trump called out China on Aug. 5 as a “currency manipulator” by depreciating the yuan to its lowest level in 11 years, Pence added.
In a Twitter comment on the same day, President Trump wrote such moves to devalue China’s yuan undermine U.S. business and factories, “hurt our jobs, depress our workers’ wages and harm our farmers’ prices.”
China Thwarts a Potential Trump Administration Trade Deal
The Trump administration wants its trading partner China to “thrive,” not suffer, Pence said. Indeed, President Trump has a positive relationship with President Xi, the administration has “great respect” for the Chinese people and seeks “productive discussions” with its leaders about trade, Pence added.
“But for the United States to make a deal with China, Beijing needs to honor its commitments, beginning with the commitment China made in 1984 to respect the integrity of Hong Kong’s laws through the Sino-British Joint Declaration,” Pence told his audience in Detroit.
As President Trump said on Sunday, Aug. 19, on a day when at least 1.7 million people attended a pro-democracy rally in Hong Kong to protest against the use of force by police there, it will be much harder to reach a U.S.-China trade deal if authorities resort to violence against their own people, Pence said.
Threats by China Hurt Prospects of Trade Deal with Trump Administration
“And I want to assure you, our administration will continue to urge Beijing to act in a humanitarian manner and urge China and the demonstrators in Hong Kong to resolve their differences peaceably,” Pence said.
President Trump has expressed the need for a fair trade agreement that includes an end to “stealing American jobs, American companies and America’s ideas,” Pence said.
“The time has come for China to come to the table, open their markets and live by the rules of international commerce like every other industrialized nation does,” Pence said. “So, we’re standing strong. And I want to assure you the United States will continue to engage in discussions with China, and we’ll continue to pursue a reset in our relationship until our trading relationship with China is free, and fair, and reciprocal.”
Unresolved Issues Delay Trump Administration Trade Deal with China
U.S. and Chinese trade negotiators have addressed key trade issues without reaching an agreement. Top U.S. concerns include:
- Ways in which United States companies are pressured to transfer technology to Chinese companies;
- A need for enhanced protection and enforcement of intellectual property rights in China;
- The numerous tariff and non-tariff barriers faced by United States companies in China;
- Harm resulting from China’s cyber-theft of United States commercial property;
- How market-distorting forces, including subsidies and state-owned enterprises, can lead to excess capacity; and
- The need to remove market barriers and tariffs that limit United States sales of manufactured goods, services and agriculture to China.
Paul Dykewicz interviewing Kevin O’Leary
Kevin O’Leary, one of the wealthy panelists on the “Shark Tank” television program who entrepreneurs pitch to fund the growth of their start-up businesses, told me in a recent interview that any short-term sacrifices, such as the loss of U.S. agricultural exports, will be worth it to achieve those key U.S. goals. If an agreement for fair trade is reached between the United States and China, the upside would be significant for the S&P 500, he added.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.