The financial news headlines have been dominated by articles related to China in recent months. President Trump made a campaign promise to battle the U.S.’s trade imbalance with China and he has certainly been ratcheting up the pressure on America’s biggest trading partner in recent months.
It is no secret that the U.S. has a huge trade deficit with China. This has been the case for decades, and is nothing new, but the question of how to address the $370 billion trade deficit is not an easy riddle to solve. Trump wants to lower the trade deficit by $200 billion, but the likelihood of accomplishing such a fear seems far-fetched in my opinion.
The quickest way to combat the trade imbalance is with tariffs, but the danger of U.S. imposed tariffs is that China, among other countries, will react with their own tariffs, which will in turn spark an all-out trade war that threatens the health of the global economy.
Of course, nothing is set in stone just yet, and this week will see both countries meet to discuss future moves. Trump appears willing to negotiate, and just over the weekend announced his intention to help Chinese electronics maker ZTE, which was on the brink of collapse after U.S. imposed penalties on it last month for breaking sanctions against Iran and North Korea. The U.S. forbid American companies from selling products to the company for seven years, resulting in the company announcing last week it would have to shut down major operations.
Trump appears willing to work with China to help save ZTE – a move that could give him more leverage in ongoing trade discussions. China, for its part, has stated that it is willing to buy more American goods and services to help reduce the trade deficit. Will any meaningful chances come out of the current discussions? Time will tell, but it is still a volatile situation, and companies with big exposure in China should be worried, as should their investors.
Here are five companies that have high exposure in China that investors should be aware of.