On January 1st, 2019, The 25% China Tariffs Come into Effect

Overseas Trading

The US and China have been involved in a trade war with neither side showing any signs of backing down. Statistically, the two countries are the world’s two largest trading partners. The trump administration claimed that international trade between the two nations was extremely lopsided with the Chinese importing US$130 billion worth of goods from the US while the US imported a whooping US$500 billion worth of goods from China. This resulted in a massive trade deficit which the Trump administration responded to by imposing tariffs on select goods imported from China. The Chinese responded, imposing a 25% tariff on select good imported from the US which will come to effect on January 1st, 2019.

But what do these tariffs mean for the economy, and which stocks should investors look out for during this period?

As seen in the period leading up to December, the US stock market plunged immediately the Trump administrationimplemented tariffs. The reason for this was a general drop in investor confidence. As the tariffs threatened to reduce trade, the expected outcome would be some sort of stagnation in the economy and consequently stocks (which reflect a company’s financial performance) would go down to reflect this reality.

Economists expect the same reaction once the tariffs are implemented. The intensity of the drop will depend, however, on the subsequent relationship between US and China. If the tariffs imposed cause a dramatic reduction in trade between the countries, as well as straining the relationships between the US and China, then financial markets around the world are expected to drop. However, other economists argue that the Trump administration is aware of this and will at least try to maintain some sort of cordial relationship with the Chinese. This implies that although there will be a drop in the market, it will not be as large as the initial drop when the US imposed tariffs.

Overseas Share Broker

What this means is that local investors (as well as those involved in international share trading), will have to be careful when picking which stocks to put their money in. The best stocks would be those showing strong fundamentals such as the ones illustrated below:

Nike Incorporated (NKE – NASDAQ)

This is a large cap stock famously known for their signature footwear.The stock offers good value for a growth investment strategy. The average stock price for the month of November is 75$ and the stock offers a 1 – year target of 88$. The stock is clearly perceived as a superior stock with a robust Price/Earnings (P/E) ratio of 58. The company’s earnings are also expected to grow at an average rate of 12%. With all these to consider the stock checks all the boxes for characteristics of a growth stock.

Hasbro Incorporated (HAS – NASDAQ)

HASBRO is a large – cap stock in the recreational products industry.This is also another growth stock security. The stock has been trading at an average price of $95 for the month of November and is expected to trade at $107.5 in one year. The stock also has a robust P/E ratio of 52 as well as an EPS of $1.60. Investment analysts also forecast an average annual growth rate of 11% over the next 5 years giving this stock a buy recommendation as well.

Steven Madden Limited (SHOO – NASDAQ)

This is a mid – cap stock in the footwear industry.This is a growth stock that has traded at an average of 31$ over the past month and has a one – year target of $36.50. The stock has a strong P/E ratio of 17.62 and the company’s earnings are forecasted to grow at an average rate of 11% over the next 5 years.

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