Overview - advisorsexcel.com · initial proposal called for global tari˜s across the board pending...
3
U.S. TRADE UPDATE Overview At the heart of President Trump’s policy is his conviction that China has used predatory tactics to challenge American technological dominance. He has accused the country of obliging U.S. corporations to trade technology for access to the Chinese market, as well as outright cybertheft. Initially, the Trump administration placed tariffs on industrial products so that American consumers would not be impacted. However, the list of Chinese imports has subsequently expanded to a wide range of household products, from electric lamps to fish sticks. 2 Note that import tariffs affect entire supply chains in addition to the specific goods taxed. Ultimately, this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products. “Although tariffs could cause prices for consumer products ranging from cars to washing machines to rise, ‘the U.S. does not need China as much as China needs the U.S.’” — Barry Bannister, head of institutional equity strategy at Stifel 3 Hardball Strategy With China It is fortunate for the current administration that the U.S. economy is performing extremely well. Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year, yielding the best consecutive performance since 2010. Unemployment is at an 18-year low, and wages are starting to pick up. 4 GDP growth hit 4.1 percent for the second quarter of 2018, reflecting the fastest pace in four years. 5 All of this gives Trump the advantage to negotiate with other nations from a position of strength. On the other side of the bargaining table, China, Europe and Japan are all experiencing slowing growth. China is particularly vulnerable because the country exports three times more goods to the U.S. than the U.S. sends to China (measured in dollars). Given its $280 billion trade surplus with the U.S., China has much more to lose in the current trade dispute. 6 While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide, many Wall Street analysts believe that Trump’s tariff strategy to position the U.S. ahead of trade deficits will be successful. Global Trade Response Although China may be the primary trade partner in Trump’s crosshairs, his initial proposal called for global tariffs across the board pending new agreements negotiated with individual trade partners. While the knee-jerk reaction by some countries has been to retaliate with their own import tariffs, AE WEALTH MANAGEMENT The U.S. continues its controversial trade policies with the rest of the world; most notably China. In early July, the Trump administration levied 25 percent tariffs on $34 billion of Chinese imports, only to have China respond in kind. 1 While consumers can expect to pay higher prices in the wake of this trade war, investors have experienced some market turmoil but are waiting patiently for a potential surge.
Transcript of Overview - advisorsexcel.com · initial proposal called for global tari˜s across the board pending...
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
The US continues its controversial trade policies with the rest of the world most notably China In early July the Trump administration levied 25 percent taris on $34 billion of Chinese imports only to have China respond in kind1 While consumers can expect to pay higher prices in the wake of this trade war investors have experienced some market turmoil but are waiting patiently for a potential surge
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
A E W E A LT H M A N A G E M E N T
565699
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
A E W E A LT H M A N A G E M E N T
565699
US TRADE UPDATE
OverviewAt the heart of President Trumprsquos policy is his conviction that China has used predatory tactics to challenge American technological dominance He has accused the country of obliging US corporations to trade technology for access to the Chinese market as well as outright cybertheft
Initially the Trump administration placed taris on industrial products so that American consumers would not be impacted However the list of Chinese imports has subsequently expanded to a wide range of household products from electric lamps to fish sticks2
Note that import taris aect entire supply chains in addition to the specific goods taxed Ultimately this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products
ldquoAlthough taris could cause prices for consumer products ranging from cars to washing machines to rise lsquothe US does not need China as much as China needs the USrsquordquo mdash Barry Bannister head of institutional equity strategy at Stifel 3
Hardball Strategy With ChinaIt is fortunate for the current administration that the US economy is performing extremely well Corporate profits were projected to increase by more than 20 percent for two quarters in a row this year yielding the best consecutive performance since 2010 Unemployment is at an 18-year low and wages are starting to pick up4 GDP growth hit 41 percent for the second quarter of 2018 reflecting the fastest pace in four years5 All of this gives Trump the advantage to negotiate with other nations from a position of strength
On the other side of the bargaining table China Europe and Japan are all experiencing slowing growth China is particularly vulnerable because the country exports three times more goods to the US than the US sends to China (measured in dollars) Given its $280 billion trade surplus with the US China has much more to lose in the current trade dispute6
While a trade war could escalate to the point of slowing global growth and inhibiting confidence among businesses and investors worldwide many Wall Street analysts believe that Trumprsquos tari strategy to position the US ahead of trade deficits will be successful
Global Trade ResponseAlthough China may be the primary trade partner in Trumprsquos crosshairs his initial proposal called for global taris across the board pending new agreements negotiated with individual trade partners While the knee-jerk reaction by some countries has been to retaliate with their own import taris
this may not be the most prudent response from both a political and financial perspective In fact smaller countries are likely to feel the most impact as they lack the bargaining power of for example 500 million consumers in the European Union (EU)7
To wit President Trump and European Commission chief Jean-Claude Juncker announced an agreement to stay taris until they negotiate a more mutually amenable trade agreement This follows a heated exchange over Trumprsquos initial steel and aluminum taris and the EUrsquos threat for subsequent countermeasures
Although Canada is one of the more vulnerable smaller economies it has already responded with 25 percent taris on $12 billion in US imports8 One analyst has suggested that Canada could take the extreme step of barring trade in banking and insurance services restricting foreign investments or energy exports or denying US patent protection for intellectual property9
Mexico is actually in a stronger walk-away position than Canada as its foreign investment is growing due to separate trade deals with countries that have expanded export markets in recent years
South Korea has already accepted restricted import quotas in order to avoid steel taris and modified its bilateral trade deal with US-placed quotas on Korean cars10
Several emerging-market countries play an active role in global supply chains and are most impacted by the taris on imports from China Consequently collective export volumes year-to-date are down by about 6 percent from a year ago11
Impact on Investment MarketsDespite turbulence in the global trade market US stocks have remained resilient There is currently $34 trillion invested in SampP 500 index funds across a myriad of 401(k) plans IRAs mutual funds and ETFs
Should Trumprsquos trade gambit prove successful especially with China andor the EU enhanced trade agreements would be a boon for the already booming health of US companies with residual benefits for investors In the meantime much of US growth is driven by sectors such as health care which are less impacted by trade disputes12
Final ThoughtsTrade wars involving significant taris can produce several trickle impacts First higher costs are passed on to consumers which can cause higher overall inflation Higher prices also can bring about reduced demand for goods which can lead to lower production and job losses Ultimately higher taris on US imports and retaliatory taris on exports could slow global growth
However thatrsquos a worst-case scenario Trump is using Americarsquos economic dominance as a tool to threaten taris in order to negotiate trade agreements that position the US for more expansive growth in the future Should his strategy pay o US investors are well-positioned to benefit
1 CBS News July 11 2018 ldquoUS unveils taris on $200 billion more in Chinese importsrdquo httpswwwcbsnewscomnewsu-s-unveils-taris-on-200-billion-more-in-chinese-imports Accessed Aug 1 20182 Ibid3 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 20184 Ibid5 Joana Taborda Trading Economics July 27 2018 ldquoUS GDP Growth Highest in Near 4 Years in Q2rdquo httpstradingeconomicscomunited-statesgdp-growth Accessed Aug 8 2018 6 Adam Shell USA Today July 26 2018 Trump trade war US stock market is faring better than Chinas since dispute began httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018 7 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 20188 Barry Eichengreen The Guardian July 13 2018 ldquoJust wait ndash Trumps trade war will soon have falloutrdquo httpswwwtheguardiancombusiness2018jul13trade-war-brexit-economic-eects-taris Accessed Aug 1 20189 Janyce McGregor CBCCanada Aug 1 2018 ldquolsquoShooting yourself in the foot Why Canada has no good options on car tarisrdquo httpswwwcbccanewspoliticsauto-taris-wednesday-14768577 Accessed Aug 1 201810 Ibid11 David Brown South China Morning Post July 30 2018 ldquoUS is winning the trade war and Chinese growth falling to 5 per cent will be the proofrdquo httpswwwscmpcomcommentinsight-opinionunited-statesarticle2157417us-winning-trade-war-and-chinese-growth Accessed Aug 1 201812 Adam Shell USA Today July 26 2018 ldquoTrump trade war US stock market is faring better than Chinas since dispute beganrdquo httpswwwusatodaycomstorymoney20180726stock-market-says-u-s-winning-trade-war832596002 Accessed Aug 1 2018
Investment advisory services offered only by duly registered individuals through AE Wealth Management LLC The advisory firm providing you this report is an independent financial services firm helping individuals
create retirement strategies using a variety of investment and insurance products to custom suit their needs and objectives and is not an affiliate
company of AE Wealth Management LLC
Investing involves risk including the potential loss of principalNo investment strategy can guarantee a profit or protect against
loss in periods of declining values
The information and opinions contained herein provided by third partieshave been obtained from sources believed to be reliable but accuracy and completeness cannot be guaranteed by AE Wealth Management
This information is not intended to be used as the sole basis for financialdecisions nor should it be construed as advice designed to meet theparticular needs of an individualrsquos situation None of the informationcontained herein shall constitute an offer to sell or solicit any offer to
buy a security or insurance product
A E W E A LT H M A N A G E M E N T
A E W E A LT H M A N A G E M E N T
565699
