China ETFs Steady as Trump Takes Carrot & Stick Approach

Trump didn't place new tariffs on China in his first week in office, but he opened the door to doing so as soon as February.

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sumit
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Senior ETF Analyst
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Reviewed by: Paul Curcio
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Edited by: Kiran Aditham

President Donald Trump remains tough on China, but he’s willing to compromise. That appears to be the tone that the new president sought to set as he entered the highest office of the land for a second time.

For investors in China ETFs, the balanced tone was a relief. During his presidential campaign, Trump was hawkish on China, threatening to levy massive tariffs on the country, accusing it of ripping off the U.S., and portraying China as an archrival.

However, during Trump’s first week in office, he struck a different tone. Not only did the president not place any new tariffs or trade restrictions on China, he brought up the idea of visiting the country and making deals with Chinese President Xi Jinping. 

A 10% Tariff on China Still Looms

Still, this isn’t to say that Trump has backed off his threats against China completely—far from it, as he mentioned that he could place tariffs of 10% on the nation as soon as Feb. 1.

But even if those tariffs come to pass, they’re less than those Trump floated on the campaign trail, and even below the 25% tariffs he’s threatened against the U.S.'s neighbors, Canada and Mexico (when Trump was campaigning, he said at one point that he could place across-the-board tariffs of 60% on China). 

To be sure, Trump’s comments and actions during his first week could just be the opening moves to a longer chess match that extends well into his second term.

A carrot-and-stick approach would be similar to how Trump operated during his first term, when he put tariffs on China, while also making trade deals with Xi. 

In other words, investors in China ETFs will have to wait to see what Trump does in the coming months before they can fully assess the U.S. president’s impact on their investments. 

U.S.-China Relations in a Holding Pattern 

Since Trump’s inauguration, the $7.1 billion iShares China Large Cap ETF (FXI), the largest China-focused exchange-traded fund listed in the U.S., according to etf.com’s ETF screener, is up by 0.3%.

The small change in the ETF’s price reflects the holding pattern in Chinese stocks amid mixed messaging from Trump on trade relations between the U.S. and China.

Since the start of the year, investors have taken $125 million out of the ETF.  

ETF Outflows

Investors can analyze all China ETFs using the aforementioned screener. Funds can be sorted by performance and flows, as well as many other factors, like P/E ratios, dividend yields, and more.

Sumit Roy is the senior ETF analyst for etf.com, where he has worked for 13 years. He creates a variety of content for the platform, including news articles, analysis pieces, videos and podcasts.

Before joining etf.com, Sumit was the managing editor and commodities analyst for Hard Assets Investor. In those roles, he was responsible for most of the operations of HAI, a website dedicated to education about commodities investing.

Though he still closely follows the commodities beat, Sumit covers a much broader assortment of topics for etf.com, with a particular focus on stock and bond exchange-traded funds.

He is the host of etf.com’s Talk ETFs, a popular video series that features weekly interviews with thought leaders in the ETF industry. Sumit is also co-host of Exchange Traded Fridays, etf.com’s weekly podcast series.

He lives in the San Francisco Bay Area, where he enjoys climbing the city’s steep hills, playing chess and snowboarding in Lake Tahoe.

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