When Trump announced increased tariffs on imported steel and aluminum the markets fell. A trade war would be the nail in the coffin for an already-aging bull market. Specifically, the Chinese have been selling low price steel and aluminum to US buyers for years. This is unlikely to stop because the Chinese are deeply in debt both public and private debt. In order to avoid a Japan-like-1989 collapse of their economy the Chinese need to keep their factories producing and keep bringing in at least some income. But if Trump escalates the trade war the Chinese and others will in all likelihood increase tariffs on goods sold to China, such as Boeing jets and US agricultural products. But for the investor are there trade war-proof stocks? To be protected from a trade war with China these companies need to be ones that do not do a lot of business in or with China. It turns out that the FANG tech darlings that have helped drive the US market higher and higher are somewhat trade war-proof stocks at least when it comes to China.
CNBC quotes Cramer of Mad Money as saying that Facebook, Amazon, Netflix, and Google (Alphabet) are pretty much trade war-proof when it comes to China tariffs because none of them does business there!
Facebook’s shares rose by more than 2 percent in Monday’s trading session due to the fact that the social media company doesn’t have a lot of Chinese business, Cramer said.
Amazon, shares of which climbed 1.6 percent on Monday, was safe from fears of Chinese retaliation because the People’s Republic has its own e-commerce colossus: Alibaba.
China doesn’t have Netflix, either. That, along with positive notes from two Wall Street analysts, helped shares of the entertainment giant soar to a new 52-week high on Monday, closing up 4.6 percent.
Finally, Google parent Alphabet’s search service is prohibited on the Chinese mainland, making it one of the safer international stocks out there, Cramer said. Shares of Alphabet rose 0.98 percent on Monday.
Owners of these stocks know that they do not do business in China and so they are buying more of these US-China trade war-proof stocks. But who else is safe from retaliation by the Chinese or other foreign nations?
Totally Domestic US Companies
Although a trade war would slow the US economy, companies that do business exclusively in the USA will be safe from the effects of foreign tariffs. Fox Business discusses companies that only sell in the USA.
A handful of the larger players whose revenues were generated solely in the U.S. at the end of its last fiscal year included: AT&T (NYSE:T), with over $132 billion in revenue; Kroger (NYSE:KR), $108.5 billion; Wells Fargo, (NYSE:WFC) $82.9 billion and Target (NYSE:TGT), $72.6 billion.
Depending on how the Trump tariffs work out and on foreign responses traders and investors may be well advised to investigate trade war-proof stocks. And, as we wrote last month, discipline and rules result in trading profits so pay attention and deal with this issue now, before you experience tariff-related losses.
