US-China Tensions Could Put Pressure on Technology Industries

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In Brief
  • US-Chinese tensions continue to escalate.

  • Trump condemned the action of the Chinese government, but did not create new trade embargoes.

  • Stocks jumped almost immediately on the news.

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Souring relations between the US and China could have the greatest impact on technology sector stocks. The technology sector is in a place of particular weakness due to its substantial supply chain requirements based in China.

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The worsening relations are largely due to China’s recent security activity in Hong Kong. In response, President Trump announced an end to Hong Kong’s privileged status for trade.

However, while the President made clear his condemnation of the actions, he stopped short of further trade restrictions on China. This caused an almost immediate jump in technology stocks, particularly in semiconductors.

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According to Paul Christopher, head of global market strategy at Wells Fargo Investment Institute, the President’s actions forestalled a substantial stock decline. Christopher stated:

If he had done something more heavy handed, if he had done something to change the phase one trade deal, that would have been the fear that the market had started pricing in.

Analysts also suggest that posturing by both former Vice President Joe Biden and President Trump during the election could increase tensions. With an election forthcoming, both candidates will want to appear strong.

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With a background in science and writing, Jon's cryptophile days started in 2011 when he first heard about Bitcoin. Since then he's been learning, investing, and writing about cryptocurrencies and blockchain technology for some of the biggest publications and ICOs in the industry. After a brief stint in India, he and his family live in southern CA.

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