In late June U.S. President Donald Trump opted to side with the moderates in his administration when it came to dictating its next move against China. Trump deferred to Congress to strengthen controls on Chinese investment through the powers of the Committee of Foreign Investment in the U.S. (CFIUS). Although this represents a more moderate tone, Trump did not rule out returning to more aggressive measures if Congress did not produce a “strong” response.
U.S. markets were closed for July 4 which may have been a positive following another negative day for all three major indexes on July 3. Boeing Co. (NYSE:BA), a company that has a vested interest in the U.S.-China relationship, has seen its stock plummet 6.6% in 2018 so far. China is looking at a number of options in its bid to retaliate against U.S. tariffs, and Boeing will likely be caught in the crossfire.
China reaffirmed its intent to purchase jets from European multinational and chief Boeing competitor Airbus in late June. France has pushed to close an $18 billion deal which would see it sell 180 Airbus A380s to China. Boeing has managed to shore up its business after reaching an agreement with India, which has emerged as a crucial geopolitical ally for the U.S. in the Trump era.
Investors should not expect this trade war to cool in the coming months. On the contrary, the GOP will likely look to push its economic nationalist credentials ahead of the November midterms. This will mean heightened rhetoric and a commitment to confronting China on trade.
