Markets in Freefall as Trump Orders American Companies out of China

Markets in Freefall as Trump Orders American Companies out of People's republic of china

This is not investment communication. The author has no position in whatever of the stocks mentioned. WCCF TECH INC has a disclosure and ethics policy.

Things are heating up in the US – Red china trade war today as President Trump went on the twitter warpath with a serial of tweets ordering American companies to "start looking for an alternative to Prc". The tweets in full below:

Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a yr, & they want to continue. I won't allow that happen! We don't demand China and, bluntly, would be far....

— Donald J. Trump (@realDonaldTrump) Baronial 23, 2019

....improve off without them. The vast amounts of money made and stolen by China from the Us, year after year, for decades, will and must Cease. Our keen American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..

— Donald J. Trump (@realDonaldTrump) August 23, 2019

....your companies Home and making your products in the USA. I will be responding to People's republic of china's Tariffs this afternoon. This is a Bully opportunity for the United States. Besides, I am ordering all carriers, including Fed Ex, Amazon, UPS and the Post Part, to SEARCH FOR & REFUSE,....

— Donald J. Trump (@realDonaldTrump) August 23, 2019

....all deliveries of Fentanyl from China (or anywhere else!). Fentanyl kills 100,000 Americans a year. President Eleven said this would finish - it didn't. Our Economy, considering of our gains in the last ii 1/2 years, is MUCH larger than that of China. Nosotros volition keep information technology that way!

— Donald J. Trump (@realDonaldTrump) August 23, 2019

It'due south a remarkable series of quotes in response to the latest Chinese retaliation (raising tariffs on the United states) to Trump's latest circular of tariffs. Phew! This comes hot on the heels of other major economic activeness in the shape of the earlier Trump tweet asking whether the bigger enemy was with the options existence his own hand-picked Federal Reserve Chair Jerome Powell or Chairman 11!

....My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?

— Donald J. Trump (@realDonaldTrump) August 23, 2019

This was due to Trump's dissatisfaction with Powell'south lack of hints about further interest charge per unit cuts, although some are speculating that the President didn't realise the Powell Speech today wasn't a policy spoken communication on rates, simply a voice communication which happens annually separate from the FOMC. Readers may recollect that the Fed just cut rates by 25 ground points (0.25%) which resulted in the President calling for a 100 basis point cutting shortly after!

Firsthand reaction has been widespread and all negative. Every major market place sector is collapsing with engineering being the hardest hitting. The S&P 500, Dow Jones Industrial Average and Nasdaq Composite are all downward over 2% while the SOX Semiconductor index is downwardly over iv%. Pretty much annihilation with exposure to Red china, whether via manufacturing, rare earths, consumption, some combination of the above or other factors is being hit and the market is at present pricing in better than even money on 75 basis points of Fed rate cuts for the residuum of the year. Throw in another The states bond yield curve inversion and we're looking at a lot of frazzled investor nerves as we caput into the closing bell of the United states of america market for the week.

The President has said that he will answer to People's republic of china's latest tariffs after today and we'll wait to see what comes adjacent.

Tech Bears Brunt of Hitting

As we know, technology stocks have been suffering a lot from the merchandise war given the number of partnerships, supply lines, assemblers and consumers of engineering all converge on China. Fleck stocks in particular have been hit as usual with Intel (NASDAQ:INTC), NVIDIA (NASDAQ:NVDA) and AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO) and Qualcomm (NASDAQ:QCOM) all massively downwards.

Everybody is on eggshells and nobody really wants to be long heading into a weekend with massive unknowns as to how the President is going to retaliate and what Red china may do over the weekend with the possibility of devaluing the Yuan once again.

Non-chip tech companies are also suffering with Apple (NASDAQ:AAPL), Tesla (NASDAQ:TSLA), Activision Blizzard (NASDAQ:ATVI), Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) all downwardly over 3% likewise.

Breaking Downward the Activity

Ordering American companies to "seek alternatives to Red china" is a tricky matter. Technically, the President plainly doesn't have the power to order private companies to move international subsidiaries or operations out of a land but at the same time, at that place are significant levers the President can have to brand life harder for companies which choose to ignore him.

Concerns are also being raised as to whether the President could directly the Treasury to arbitrate in currency markets to endeavour to weaken the U.s. Dollar and the Greenback has moved a chip lower in anticipation of possible intervention here. It would be difficult to intervene in currency markets though given the US only has about $70 billion of firepower with which to practise this and that'southward goose egg in relation to currency trading which sees about $5 trillion in transactions every day.

Likewise under the guise of stopping fentanyl imports from China, the President is once more ordering all carriers similar Fed Ex, Amazon, UPS and the Postal service Office to search for and refuse all fentanyl deliveries from Mainland china. Again, ordering private companies how to operate their business is a catchy subject and while fentanyl labs in Cathay aircraft to the Usa is a problem, information technology is as well probable that this is aimed at slowing down goods shipments from China to the United states of america.

Exactly what will happen side by side is unclear. Tariffs have been the go to action in the trade war thus far but the feeling is that additional action is on the fashion. If this is the instance, whether via shipping inspections, currency interventions, WTO complaints, or fifty-fifty some form of economic sanctions broader than unmarried company blacklists is unclear. Keep information technology tuned here while we follow the action.