Paul Mampilly has stated that President Donald Trump has been threatening to start a trade war with China, and some stocks are going to suffer because of it. The unfortunate thing about this is that the stocks that are set to take a fall are currently extremely popular.
Wilbur Ross of the Commerce Department has called China “the most protectionist country” on our list of trade partners and stated that new tariffs will be placed on Chinese aluminum and steel. The announcement caused steel stocks to rise for one day, but experts believe that if this sort of talk and the actions it leads to continue, American companies that are overexposed in China could pay a very high price.
In response to the announcement, China stated that it may turn its attention to Boeing, Starbucks and General Motors and place a 45 percent tariff on products imported to the United States from China. The danger is that future revenue would be in as much peril as near-term revenue if the U.S. follows through with its promises.
President Trump would place an import tariff on foreign goods to make these products more expensive in the U.S. marketplace. This gives an upper hand to manufacturers of steel and aluminum in the United States. These import tariffs would also reduce the amount of products of low quality that China has been dumping into U.S. markets. This strategy is not without risks because analysts say that steel and aluminum manufacturing in America would also suffer. In addition to that, if prices remain high for a long period of time, it will hurt several companies’ bottom lines, stunt job growth and hurt the overall economy.
When these particular stocks start to lose value, investors big and small are going to want to sell them. This, of course, is going to mean that no one will be in the market to buy them. As of right now, these stocks are looking very weak. One example is Harley-Davidson, and it lost 6 percent of its value following an announcement that it would start producing some of its equipment overseas.
Paul Mampilly says that people should start selling their stocks now before the selling gets out of control and people begin to lose money.
Paul Mampilly used to work on Wall Street, but he left that line of work because he wanted to help regular people buy the best stocks for their portfolios. He started the newsletter Profits Unlimited for this purpose. With his years of experience and expertise, Paul Mampilly recommends the stocks that he believes are going to climb higher to the 130,000+ subscribers who receive his newsletter.
What does Paul Mampilly recommend that you sell?
The Boeing Company
According to Paul Mampilly, the one to get hit the hardest will be Boeing. It is the number one stock that is overexposed to China. This is a blue-chip stock, and 13 percent of its sales come from China. Boeing was expecting China to purchase 30 percent of the 737s that it makes, but China can easily start to buy from European company Airbus. This one action would send Boeing’s stock crashing to the ground. In addition to that, 150,000 American jobs would be at risk if China follows through with this threat.
It’s also time to avoid Apple. Approximately 25 percent of Apple’s sales come from China. Apple’s products are also made in China. Because of this, Apple’s predicament is different from all other companies. If China were to do something to prevent Apple phones from being sold in China, Apple’s stock would be worthless.
The iPhone factories that Apple operates in China could also be in trouble. China could decide to inspect these factories more often than it has been doing in the past, but it could also charge Apple more for transportation fees so that it will be more difficult for Apple to transport its phones to other global markets.
In other words, a trade war means that Apple will lose.
The possibility exists that President Trump will encourage Apple to begin producing iPhones in the United States, and analysts believe that American manufacturers will outperform those in China. However, increased production in the U.S. will mean higher prices and lower profits. Experts say that share buybacks and dividends will no longer exist.
Starbucks is also overexposed to China. There are more than 1,540 Starbucks stores in China. That means that 6 percent of Starbucks stores are in China, and the company wants to have as many as 5,000 Chinese stores by 2021. Starbucks is currently losing steam in America, so it is counting on China to make up for that because the Chinese Starbucks market is growing faster than any other market in the world.
A trade war wouldn’t mean anything good for Starbucks, and we could expect to see the lowest of the lows for this company.
General Motors Company
This is another company that is highly dependent upon China. In 2017, GM sold the Chinese more than 4 million vehicles, and only 20 million cars were sold in China in total that year.
GM had a record number of sales to China in the last quarter, but it could decide that it wants to purchase cars from local manufacturers. All it would need to do is give people incentives for buying locally. It could also tie up GM in red tape and regulations so that it would be difficult for GM to manufacture its cars in China.
It is best to leave this stock alone until GM settles its differences with China.
Walmart is double exposed in China as Apple is double exposed. China currently has 20 Walmarts. It also has 1.4 million members of its 14 Sam’s Clubs, and Sam’s Club has been growing at a rate of 10 percent each year. On the other side, Walmart purchases a ton of merchandise from China. Experts have stated that 40 percent to 70 percent of the things sold at Walmart were purchased from China.
The point must be made here that China would also be hurt if there is a trade war between it and the United States, but there is still danger.
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