Who Are The Winners And Losers In China From A Trade War With Trump?

After months of warnings of a potential trade war, the President finally took action on 3 April 2018, placing 25% tariffs on roughly 1,300 Chinese goods, which will target about $50bn of 2018 imports. 

China's response followed less than 24 hours later, which was to target up to $50bn on 106 US products annually. President Trump subsequently threatened to place an additional $100bn of tariffs on Chinese goods.

'A policy mistake of gigantic proportions': Markets and experts react as China hits back at Trump'strade tariffs

Justifying this latest threat, Trump tweeted: "When a car is sent to the US from China, there is a Tariff to be paid of 2.5%. When a car is sent to China from the US, there is a tariff to be paid of 25%. Does that sound like free or fair trade. No, it sounds like STUPID TRADE - going on for years!"

If the US and China fail to reach an agreement and the tariffs are implemented, John Tsai, manager of the $333m China Equity fund at Eastspring Investments, said it was the smaller export sectors such as machinery, electronic products and equipment, steel and other industrial materials that would be most impacted.

China's move to a domestic-consumption driven economy has been well documented (its export share of GDP has fallen from 37% in 2007 to below 20% this year) and it is expected that trade tariffs could accelerate this shift.

Tsai noted the tariffs could lead to opportunities in domestic food retailers, which would benefit from rising inflation caused by a climb in soybean prices, and the inflationary nature of a trade war more generally.

Eastspring CIO Maisonneuve: A China that goes back to 12% growth is unsustainable

Furthermore, Andy Rothman, investment strategist at Matthews Asia, said the team in China were preparing to move into domestic consumer companies if the trade war caused the market to sell-off further.

Chinese markets fell sharply after President Trump released details of the tariffs, with Hong Kong's Hang Seng index dropping 2.2% to 29,519 points, while China's Shanghai Composite index fell 0.5% to 3,131 points on 4 April.

"We see this as a short-term buying opportunity if valuations come down," Rothman said.

"We are looking at domestic companies such as education, consumer durables and consumer staples; as this is one of the best consumer stories in the world.

"However, China do not want a trade conflict. The country has said it wants to negotiate, which means implementing steps quickly to give US companies better market access and more protection for their intellectual property."