In the event of a U.S.-China trade war, Dominion’s Funds are “low risk”
In a note circulated last Friday, Dominion equity analyst and Investment Manager Christian Cole discussed the potential impact of a U.S. China trade war. He wrote: “our analysis indicates Dominion’s Funds currently have a low risk exposure to any likely tariffs imposed on goods by either China or the U.S. Any exposure the Funds do have will be monitored closely and reduced if an escalation does occur.”
He also added that Europe appears to have been “let off the hook” by President Trump, who has made his focus on China very clear. According to Cole, while this could change in the future “for now this appears to be a net positive for Dominion’s Funds, which are weighted towards European stocks.”
On Thursday, Trump reiterated the “America First” ethos with which he won the presidency, announcing tariffs on $50 billion of Chinese imports. He claimed that this was a direct retaliation for intellectual property abuses. On Friday, China responded in kind, ordering tariffs on $3 billion of U.S. imports.
Stephen Roach, Morgan Stanley’s former non-executive chairman in Asia, now a senior fellow at Yale University, commented:
“China’s response is surprisingly modest in light of the U.S. actions, suggesting there could be a good deal more to come. As America’s third largest and most rapidly growing export market and as the largest foreign owner of Treasuries, China has considerably more leverage over the U.S. than Washington politicians care to admit.”
However, further measures from Beijing may well be in the works. A Chinese Commerce Ministry statement released on Friday stated that the country would pursue legal action against the U.S. at the World Trade Organisation, in response to planned tariffs on steel and aluminium imports. Chen Fuli, a senior civil servant, said that Beijing has a “comprehensive plan” to counter U.S. actions.
Despite Europe’s exemption from Mr. Trump’s tariffs, EU officials expressed misgivings about the move. European Trade Commissioner Cecilia Malmstrom said that applying tariffs to steel and aluminium was a “highly unfortunate unilateral action, which goes against agreed international rules.”
The opinions expressed in this article are not those of Dominion Fund Management, but of the author alone.
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