Special Reports | Updated: 1-Oct-18
Strategies for profiting from various market-driven themes or events using stocks and/or options.

Trade Tariffs & Trade Summary following USMCA trade agreement

The Trump Administration began its trade dispute with China in early 2018. Before that, the administration considered tariffs on specific products. The China tariffs were initiated under Commerce Department Section 301. The tariffs on specific products such as steel, aluminum, washing machines, and solar panels were initiated under Commerce Department Section 232 and 201. The below charts show where the tariffs currently stand and what percentage of imports from U.S. & China. are subject to tariffs. The below information will be updated as events change.

--Carmine Atteo, Briefing.com

Trade tariffs summary:
*As of October 1st, 2018 (information will be updated as events change)

U.S. Section 301 (China Tariffs) Active Yes/No Stocks Impacted
$34 billion in tariffs (nuclear reactors, aircraft engine parts, agricultural machinery, autos) -- 25% tariff. Active Negative: BA, GE, CAT, DE, UTX, MMM, PG, CL, AAPL, CCJ, SYY, DDAIF, FCAU, BMWYY, VLKAY, F, GM, MU.
$16 billion in tariffs. “Made in China 2025” industrial policy products including IT, robotics, rail cars and motorcycles. 25% tariff. Active Negative: ISRG, IRBT, CGNX, HON, HOG, CSX, UNP, NSC, KSU.
$200 billion in tariffs at 10% as of 9-24-18 (rate will be 25% on 1-1-19). Products: food ingredients, auto parts, art, chemicals, paper products, apparel, air conditioners, toys, furniture, and electronics (iPhones, smartwatches excluded). Active Negative: DWDP, KSS, WMT, TGT, NKE, SKX, KS, CLW, KHC, MGA, LEA, F, AAP, XRT, M, JWN, BBY, BID, AAON, FIX, LZB, MAT, HAS. Positive for: AAPL, FIT based on exclusions.
President Trump's threat to impose another $267 bln in China tariffs. Pending Review (date TBD). List Pending
     
U.S. Section 232 & 201 Tariffs Active Yes/No Stocks Impacted
Steel and Aluminum Tariffs (South Korea, Australia exempted) -- 10% tariff on steel and 25% tariff on aluminum. $3 bln on imports from China. Active Positive For: X, AKS, TMST, CMC, NUE, STLD, CENX, AA, CSTM, ARNC, FCX.
25% tariff on autos, SUVs, and auto parts. Review period delayed amid talks. No timetable for completion. EU tariffs on hold. Positive: GM, F, TSLA. Negative: VLKAY, DDAIF, RACE, BMWYY. FCAU, LEA, VC, SRI, SUP, MPAA, TWI.
20% tariff on washing machines for first year and 50% thereafter; 30% tariff on solar panels. Active Positive for: TAN, WHR, FSLR, JASO, JKS, SOL, SPWR, VLSR, VGE.
Investigation into if uranium ore imports threaten national security. Pending Review (date TBD). Positive for: UUU, UEC, CCJ, URA.
20% minimum tariff on softwood lumber from Canada. Active Negative for: TOL, BZH, MDC, LEN, PHM, GRBK, HOV, KBH, DHI, MTH, LGIH, NVR, TPH, MHO.
     
Response from Overseas Active Yes/No Stocks Impacted
China's $34 billion in tariffs on automobiles, seafood, and agriculture, chemicals, and optical fiber products (Section 301 response). Active Negative: BG, ANDE, ADM, SYT, F, GM, FCAU, TSLA, X, NUE, SYY, KHC, LITE, FNSR, GLW.
China's $16 bln in tariffs on U.S. goods. Similar products to above. Also includes coal, diesel & medical products (Section 301 response). Active Similar to above. Also negative for: KOL, VAR, ISRG, RMD, MZOR.
EU, Canada, and Mexico tariffs on cigarettes, steel, boats, motorcycles, and agriculture (Section 232 response). Active Negative for: BG, ANDE, ADM, MO, AKS, X, NUE, BC, HZO, WMAR, HOG, BA.
China's $3 billion in tariffs on fruit, nuts, pork, and sparkling wine (Section 232 response). Active Negative for: BUD, TAP, BF.B, STZ, FDP, CVGW, TSN, HRL
EU threat to impose $300 bln in tariffs on U.S. goods (potential response to auto tariffs). Pending Review (date TBD). List Pending
China's $60 bln in tariffs on medium sized aircraft, metals, tires, golf clubs, crude oil, and liquified natural gas (section 301 response). 5-10% rate. Active Negative: NUE, X, AA, KALU, DWDP, BA, UTX, EADSY, KLXI, RTN, GT, ELY, LNG, GLNG, GLOG, TELL, EOG, OXY, XOM, CVX, COP.

 

Below are tables & graphs showing the percentage of imports that are subject to tariffs on both sides (U.S. and China).

Tariffs on U.S. imports from China   Tariffs on China imports from the U.S.  
       
Active Tariffs $253,000,000,000 Active Tariffs $113,000,000,000
Imports with no tariffs $269,900,000,000 Imports with no tariffs $74,500,000,000

 

 

----------------------------------------------------------------------------------------------------------------------------------------

NAFTA or the "North American Free Trade Agreement" was an agreement signed into law in 1993 by President Bill Clinton. NAFTA eliminated tariffs between US, Canada, and Mexico. President Trump campaigned against the free trade agreement indicating that the U.S will either re-negotiate the agreement or terminate the agreement. If the agreement is terminated, it will allow the US, Canada, and Mexico to levy tariffs on imports.

Latest Developments: On October 1st, 2018, U.S., Canada, and Mexico reached a trilateral trade agreement. It will be called the United States, Mexico, Canada trade agreement or USMCA. This deal is expected to be signed by all three leaders in 60 days. It will require Congressional approval. The House is on recess until November 13th. Therefore, any action will have to wait until next year. If the Democrats have control of the House in 2019, it might make passage of this bill more uncertain. Although, it can get passed with 51 Senate votes. The deal will also need to get ratified by lawmakers in Canada and Mexico.   

  • U.S. dairy farmers will have access to about 3.5% of Canadian dairy market. This should be positive for Dean Foods (DF).
  • Agreement will last 16 years. There will be a required review process every 6 years.
  • Auto content rules: Under the original NAFTA agreement, at least 62.5% of the material in an automobile must be from North America. This threshold will be raised to 75%. This provision should be positive for automakers: F, GM, FCAU, TSLA and auto parts companies such as LEA, MGA, TWI, SRI.
  • U.S. plans to keep 2.5% auto tariff currently applied under WTO rules if cars are made at factories that already exist.
  • Countries will be protected from any additional auto tariffs. Steel and aluminum tariffs will remain in place . If auto tariffs go into effect with other countries, Canada agreed to a quota of 2.6 million cars exported to the U.S (related stocks:  X, AKS, TMST, CMC, NUE, STLD, CENX, AA, CSTM, ARNC, FCX).
  • New provision would require a larger portion (40-45%) of each car or truck to be made in high-wage factories ($16/hour minimum). This provision might be negative for the auto makers listed above.
  • Independent tariff dispute settlement system will remain in place.
  • Countries have agreed to stronger rules of origin that exceed those of both NAFTA 1.0 and the Trans-Pacific Partnership, including for autos and automobile parts and other industrial products such as chemicals, steel-intensive products, glass, and optical fiber (potential related stocks: DWDP, SLX, GLW).
  • The new provisions on textiles incentivize greater United States and Mexican production in textiles and apparel trade, strengthen customs enforcement, and facilitate broader consultation and cooperation among the parties on issues related to textiles and apparel trade.
  • Canada would be protected from lumber tariffs. This should be positive for: WY, RYN, PCH.
  • Agreement includes enforceable rules to deter countries from weakening their currencies.
  • Overall, the news should be positive for the followings stocks that have exposure to Canada and Mexico . Some examples: AXL, KSU, MGA, CL, TAP, AGCO, PWR, F, COST, LEA, CGI, FLR, UNP, GM, BWA.

Below is a table that shows companies with the most revenue exposure to Canada and Mexico.  A potential renewed USMCA deal would be positive to the names with significant or moderate exposure.

USMCA summary:

Information below gathered from each company's recent 10K or 10Q filing.