Tensions
are
ratchetting
up
between
U.S.
and
its
major
trading
partners.
In
the
latest,
Bloomberg
on
Wednesday
reported
that
the
Biden
administration
is
considering
a
wide-sweeping
rule
to
clamp
down
on
companies
exporting
their
critical
chipmaking
equipment
to
China.
That
follows
new
tariff
rates
on
$18
billion
worth
of
Chinese
imports
—
including
electric
vehicles,
solar
products
and
steel
as
well
as
aluminum
—
that
the
Biden
administration
announced
in
May.
And
in
an
interview
published
Tuesday,
former
president
Donald
Trump
said
Taiwan
should
pay
the
U.S.
for
defense
,
claiming
also
that
Taiwan
took
“about
100%”
of
America’s
semiconductor
business.
Trump
also
pledged
that,
if
elected,
he
will
impose
a
10%
tariff
on
all
U.S.
imported
goods,
and
more
than
60%
tariffs
on
Chinese
imports.
Markets
are
betting
on
increasing
odds
of
a
Trump
presidency
after
the
attempted
assassination
on
the
former
president
last
weekend,
raising
the
question
of
what
this
means
for
investors.
U.S.-China
risks
JPMorgan
says
China’s
utilities
sector
could
be
“the
winner”
if
U.S.-China
tensions
escalate.
It
noted
that
during
the
three
periods
of
U.S.-China
trade
tensions
between 2018
and
2020,
where
there
was
escalation,
a
standoff
and
a
re-escalation,
the
MXCN
Utilities
index
did
better
than
the
broader
MXCN
index
—
with
an
average
outperformance
of
12.8%.
JPMorgan’s
top
picks
in
this
area
in
this
area
include:
Hong
Kong
and
China
Gas
,
Power
Assets
and
Huaneng
Power
.
They
are
all
Hong
Kong-listed.
The
bank
also
noted
that
the
Republicans
have
pledged
to
“bring
critical
Supply
Chains
back
to
the
U.S.,
ensuring
National
Security
and
Economic
Stability”
and
“strengthen
Buy
American
and
Hire
American
Policies.”
That
could
be
negative
for
Chinese
tech
exporters,
it
said
in
its
July
17
report.
Europe’s
‘prime
concern’
Europe’s
gross
domestic
product,
as
well
as
the
earnings
of
its
companies,
could
be
hit
by
tariffs,
said
Goldman
Sachs
in
a
July
17
report.
“Prediction
markets
are
now
assigning
a
high
probability
of
a
Trump
re-election
n(c.70%).
For
Europe,
the
prime
concern
is
tariffs,”
wrote
Goldman
analysts.
Goldman’s
economists
estimate
Trump’s
10%
tariff,
if
it
comes
to
pass,
would
take
out
one
percentage
point
from
the
euro
area’s
gross
domestic
product.
Each
one
percentage
point
drop
in
sales-weighted
GDP
would
cause
a
10%
decrease
in
European
stocks’
earnings-per-share,
said
Goldman.
Overall,
the
total
hit
to
Europe’s
earnings-per-share
would
be
about
six
to
seven
percentage
points,
the
bank
said.
“If
the
entire
impact
came
in
2025
this
would
be
enough
to
eliminate
any
growth
that
year
(our
current
top-down
forecast
is
4%),”
Goldman
wrote.
The
bank
also
looked
to
history
as
a
guide,
saying
that
emerging
markets
were
the
worst
performers
in
response
to
tariffs
imposed
in
2018
and
2019.
China
was
hit
the
most,
followed
by
Europe
and
then
then
the
United
States.
Within
Europe,
Germany
was
more
affected
than
France,
said
Goldman.
Within
sectors,
beneficiaries
of
rising
trade
risks
tend
to
be
defensive
stocks
such
as
utilities,
health
care
as
well
as
Europe’s
GRANOLAS
stocks,
according
to
the
bank.
Goldman
coined
the
term
GRANOLAS,
which
refers
to
the
continent’s
largest
market-cap
companies:
GSK
,
Roche
,
ASML
,
Nestle
,
Novartis
,
Novo
Nordisk
,
L’Oreal
,
LVMH
,
AstraZeneca
,
SAP
and
Sanofi
.
Cyclical
stocks
—
autos,
industrials
and
financials
—
tend
to
be
negatively
correlated
to
trade
uncertainty,
said
Goldman.
Overall,
if
Trump
gets
reelected,
Goldman
is
bullish
on
its
basket
of
stocks
that
comprises
European
companies
with
U.S.-based
businesses
rather
than
exporters.
It
noted
that
in
recent
years,
a
large
portion
of
Europe’s
manufacturing
production
has
been
shifted
to
the
U.S.
Constituents
of
that
basket
include:
Air
Liquide
,
British
American
Tobacco
,
Dassault
Systemes
,
GSK
,
Novo
Nordisk
,
Roche
,
Stellantis
,
Intercontinental
Hotels
and
more.
Mega
tech
stocks
Global
chip
stocks
fell
sharply
on
Wednesday,
with
ASML
,
Nvidia
and
TSMC
posting
declines after
those
reports
of
potentially
tighter
trade
restrictions
from
the
U.S.
Those
declines
have
implications
for
mega
tech
earnings,
according
to
Louis
Navellier,
chairman
and
founder
of
Navellier
&
Associates.
“Today’s
tech
correction
seems
to
suggest
that
the
growth
rate
of
Mega
Tech
earnings,
which
have
a
very
big
influence
on
overall
market
earnings,
are
expected
to
slow,”
he
wrote
in
a
Wednesday
note.
But
he
says
a
“meaningful
selloff”
in
mega
tech
will
see
other
names
“pushed
down
as
collateral
damage.”
“These
will
be
buying
opportunities.
And
if
the
AI
narrative
plays
out
as
expected,
a
material
sell-off
in
Mega
Tech
will
present
a
buying
opportunity
in
those
names
as
well,”
he
wrote.
—
CNBC’s
Michael
Bloom
contributed
to
this
report.
