Full-Blown Trade Spat: 5 Most-Vulnerable Sector ETFs & Stocks

Forget a deal, the United States and China are in fact into a full-blown trade war. Just a few days after the Trump administration lifted tariffs on $200 billion worth of Chinese goods from 10% to 25% on May 10, China announced a retaliatory move – a tariff hike on $60 billion of American goods to 25% starting Jun 1. Trump is also considering additional tariffs on an incremental $325 billion of Chinese imports.

Against this backdrop, we highlight the most vulnerable sectors amid trade skirmish and the impacted ETFs and stocks from each sector.

Semiconductor

Per Morgan Stanley (NYSE:MS) equity strategists, “semiconductor and semiconductor equipment companies have the highest revenue exposure to China at 52%” and are thus exposed to maximum risks on rising trade tensions.”

Chipmaker Qualcomm (NASDAQ:QCOM) has 65% revenue exposure to China and Nvidia’s (NASDAQ:NVDA) sales exposure to China is 56%, per Goldman Sachs (NYSE:GS). Apart from these, a few other tech and semiconductor companies like Intel (NASDAQ:INTC) INTC, Micron Technology (NASDAQ:MU) MU and Applied Materials (NASDAQ:AMAT) AMAT have 22% to 55% sales exposure to China. This clearly explains the somber mood in the semiconductor space (read: Semiconductor ETFs to Watch Post Intel's Q1 Earnings).

First Trust Nasdaq Semiconductor ETF FTXL — down 5% on May 13

nLight Inc. LASR — down 1.2%

Energy

U.S. energy companies have about 14% exposure to China. Starting June, U.S. LNG will be subjected to a 25% tariff by China. Also, a full-blown trade war means slackening growth in both economies, which may hinder demand for oil and gas.

SPDR S&P Oil & Gas Equipment & Services (NYSE:XES) ETF XES — down 5.5%

Chevron Corporation (NYSE:CVX) — down 1.3%

Tech Hardware & Equipment

Tech companies that have extensive trade relations with China would be at high risk in case of a trade war. These companies’ revenue exposure to China is 14%, per a CNBC article.

SPDR S&P Technology Hardware ETF XTH — down 4.2%

TESSCO Technologies Incorporated (NASDAQ:TESS) — down 10.6%

Auto

Both steel and aluminum are essential for the production of cars and trucks sold in America and would push up the sale prices of those vehicles considerably. U.S. auto companies earn about 12% revenues from China. With Beijing slamming tariffs on U.S. auto imports, car manufacturers would come under pressure. Also, U.S. exports of passenger vehicles to China dropped last year (read: Auto Sales Drop in Q1: Should You Buy ETF & Stocks?).

Though motor vehicles have managed to stay out of the list of goods that China announced on Monday, the relief seems short-lived. A next round is anticipated shortly, after the Trump administration announces plans to impose a 25% additional tariff on all outstanding imports from China, per Bloomberg.

First Trust NASDAQ Global Auto Index Fund CARZ — down 1.7%

Tesla, Inc. (NASDAQ:TSLA) — down 5.2%

Consumer Services

As tariff tensions heat up, inflation in the U.S. economy should rise. Along with most market watchers, we believe that companies will try to pass on some cost escalation to consumers. Moreover, higher inflation will boost long-term bond yields. This, in turn, might drive consumers’ borrowing costs. In any case, U.S. consumer services have about 10% sales exposure to China. If the Fed does not intervene, consumer ETFs may get hurt.

Invesco Dynamic Retail ETF (V:PMR) — down 3.5%

At Home Group Inc. (NYSE:HOME) — down 16.1%

Casino Gaming

U.S. casino companies have considerable exposure to China. Wynn Resorts generates about 75% of its revenue from China. Las Vegas Sands Corp. (NYSE:LVS) is also pretty vulnerable to China issues.

VanEck Vectors Gaming ETF BJK — down 2.9%

Wynn Resorts Limited (NASDAQ:WYNN) — down 6.2%

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