Here's Why the 'China Trade War' Is Good News for Investors
Editor's note: Talks of a "trade war" between China and the U.S. are heating up... and it has some investors spooked.
But our colleague Steve Sjuggerud says those fears are overblown.
In fact, as you'll learn in today's Masters Series essay – originally published in a special update to True Wealth China Opportunities readers late last month – Steve says it's actually a great opportunity for investors...
Here's Why the 'China Trade War' Is Good News for Investors
By Steve Sjuggerud, editor, True Wealth China Opportunities
You've probably heard a lot of media noise about China and President Donald Trump – and the possibility of a trade war.
Trump has said he will level tariffs on Chinese imports. The tariffs would amount to about $50 billion, especially focused on technology products. This comes after his March 1 announcement that imported steel – one of China's major exports – will now be taxed at 25%.
Now, China has threatened to retaliate with $3 billion worth of tariffs on U.S. goods.
How will this affect our China portfolio?
Many of our investments took a quick dip after Trump's announcements. Some of them are still struggling.
Here's my opinion today...
This is a great buying opportunity.
The financial markets are making a much bigger deal out of the tariffs than they should be... Investors were looking for a reason to sell stocks, and the tariffs made the perfect excuse.
As for the possibility of a trade war, that seems unlikely...
Right now, China's retaliation is weak. Its $3 billion tariff is nothing in the face of the $172 billion in U.S. exports China is expected to buy this year... or in the face of the $568 billion gap between how much the U.S. imported in goods and services last year compared with its exports.
It all seems like posturing. And most likely, it will come to nothing – except for a buying opportunity in Chinese stocks.
However, it's true that the tariffs – while not a threat to our portfolio – would hurt everyday Americans.
A little more than a year ago, I interviewed legendary investor Peter Churchouse on this exact subject. He has lived and invested in Hong Kong for decades. And his response couldn't have been more prescient. Here's an excerpt from that interview...
Peter: Most people around the world recognize that China is dumping steel into the world markets at what you might call unfair prices. So [tariffs on] steel is one thing that I think will get support from a lot of people around the world. But the rest of it? No.
The fact of the matter is, you are buying your TVs and your computers and your mobile phones and everything a heck of a lot cheaper today then you were 10 or 15 years ago. And why is that? It's because they have come from China and other parts of Asia where the manufacturing costs are that much lower.
If you start slapping 35% taxes and tariffs on all this stuff, it means you are raising the price on the American consumer. So in a way, that is hurting the people who voted for Trump. It is not really helping businesses...
Meanwhile, the idea that China is flooding our market with other cheap consumer goods and taking manufacturing work from Americans is completely outdated. More from the interview...
Steve: I wonder if Trump just hasn't been to China in a while... Because when you took me around China a couple years ago and we visited companies making shirts, what did they tell us?
Peter: They told us basically they had moved into Vietnam and Bangladesh where the wages and salaries of workers are a third or a quarter of what they are in China. So in a way, the story about China producing all these cheap low-end goods like shoes and t-shirts and jackets and so on... that story is already gone.
It has gone somewhere else. It has gone to Vietnam, Bangladesh, India... And it will be hitting into Myanmar, Laos, and Cambodia. So that story has disappeared. They are barking up the wrong tree if that is what they are thinking.
Hopefully President Trump isn't stupid, as these tariffs are not only a bad deal for Americans. They actually hurt his voter base.
Again, to me, this looks like posturing.
In short, we want to have our money in China today. The new tariffs will most likely amount to nothing more than a buying opportunity.
Good investing,
Steve Sjuggerud
Editor's note: Steve says rumors of a trade war have created a fantastic buying opportunity for investors. And he has uncovered a handful of stocks with triple-digit upside potential as this story plays out. Learn more about this opportunity – without sitting through a long promotional video – right here. But don't delay... this offer expires at midnight tomorrow.