Winners / Losers of a trade war

The following are based on my prediction on a full-fledged trade war with China. Buy the winners and short the losers. When the trade war is settled, reverse the directions.

Losers are:

·         American farmers and their suppliers such as fertilizers and farm equipment will be the chief losers. The government subsidies cannot last forever. Many have already lost their farms while their products have been filled up fast in storage. Currently Brazil and Argentina are filling the gaps.

·         Many chip suppliers to China will lost a lot of sales as China is the chief importer. It will take at least a year for countries to take up the slack. In 10 or so years, China will develop their own chip products. Hence, they will be back to normal in 2 years and will face China’s competition in 10 or so years.

·         Many U.S. companies are still profiting in China. These days are numbered.

·         China in the future will reduce the number of buying new planes from Boeing and/or switch the orders to Airbus. Today China still needs a lot of new planes and hence the effect may not be immediate. China is the largest market for airplanes.

·         Australia siding with the U.S. will be a serious loser. Australia supplies China with iron ores and agriculture products.

·         Many Chinese companies especially Huawei will suffer a lot even with the help from Chinese government. Huawei could lose their popular mobile phone sales outside China when Goggle stops suppling the apps to them.

·         The markets in both the U.S. and China will fall.

Winners are:

·         Vietnam is the obvious the largest beneficiary from the Sino-U.S. trade war. Many factories have moved from China to Vietnam. Many are owned by Chinese. China has helped Vietnam to improve their infrastructure. It has already gained about 8% of its GDP from the new business and is experiencing an influx of direct foreign investment.

·         India could be a beneficiary too. They have a lot of problems to be fixed internally. They should copy the model of China by opening special economic zone.

·         Malaysia is a winner too. China will cut the rare earth elements to the U.S. Many countries including U.S. and Australia produce these elements but they do not refine them from the ores due to the damages to the environment. Most will be refined in Malaysia instead of in China.

·         Countries may replace the U.S. as chips and products supplier to China. Taiwan and many EU countries are obvious beneficiaries. Many of them do not want to do business with China at the fear of being punished by the U.S.

·         Russia will replace the U.S. as the supplier of energy such as LNG to China. They will have a closer tie than their history.

·         South East Asia countries and some South American countries such as Brazil and Argentina will benefit to replace American agricultural products to China.

·         Ericsson and Nokia will be the primary supplier of 5G network to countries that ban Huawei’s products.

·         Many companies such as Samsung and Apple will capture Huawei’s mobile phone market in Europe.

·         More tourists and Chinese students will come to Europe particularly the EU countries.

Some of the symbols of the affected companies and country ETF are: VNM, INDA, EWT, ARGT, ERIC and NOK.

Related articles: 1

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