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Trade war's losers could include microchips, energy, banks

NEW YORK (AP) — Looking across the stock market, it's hard to find a company that isn't vulnerable in some degree to the U.S.-China trade war. Stocks of companies that do lots of business with China, such as chipmakers and other technology companies, are obvious candidates for investors to sell when trade worries rise. They have fallen more than the rest of the market whenever President Donald Trump sends out a tweet or speaks about tariffs.


That's why all but 2% of the stocks in the S&P 500 fell on Aug. 5, when worries ratcheted higher after China let its currency devalue to its lowest level in a decade. The damage has been widespread since Trump shocked investors on Aug. 1 by saying he planned soon to extend tariffs across virtually all Chinese imports.

The latest tariffs cover about $300 million of Chinese goods, many of them consumer products that were exempt from early rounds of taxes. Even though Trump has delayed some of the tariffs, they will ultimately raise costs for U.S. companies bringing goods in from China. Those companies will then have to either pass higher prices on to their customers or give up some of their profits. That's a big deal for investors because a stock's price tends to track the path of its earnings over the long term.







The market for interest rates has gone so haywire this month because of worries about a possible recession that long-term Treasury yields in some cases are lower than short-term yields. That's trouble for an industry that relies on borrowing money at short-term rates, lending it out at long-term rates and pocketing the difference.

MICROCHIP COMPANIES Companies that make microchips that go into laptops and other electronics have been some of the trade war's biggest victims because of how dependent they are on China. Consider Micron Technology, which got more than 57% of all its sales from China in its last fiscal year. Not only that, it needs China for rare earth minerals found there, and it also has significant manufacturing operations in the country.

Micron sank 2.9% on Aug. 1, when Trump announced he would extend tariffs to products that include laptops and mobile phones. That was more than triple the S&P 500's loss. Since Trump's 2018 tweet that "trade wars are good, and easy to win," Micron is down 8.5%, while the S&P 500 is up 7.9%.


"Every time there's a tweet, I get a call and asked, 'How does this affect CAT?'" Volkmann said, using the ticker symbol for heavy equipment maker Caterpillar. "CAT tends to make what they sell where they sell it."

That means many of its products do not have to cross borders before they are sold, which offers some insulation from the effect of tariffs. Other industrial companies have also already absorbed tariffs and successfully passed the costs on to their customers. But "it's a little like shouting in the wind to get anyone to care," Volkmann said.

When asked if any of the industrial companies he follows is much more vulnerable than others because of this next round of tariffs, he struggles to name one in particular. "The most important part is: Do we enter a recession because of them?" he said. "If that's true, that's true for all my companies."

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