Speculation that the Trump Administration’s recently announced tariffs on imported aluminum and steel will spark a trade war is prompting some investors to depart exchange traded funds viewed as vulnerable to trade wars. Some other sector ETFs are adding assets as a result.
The tariffs fueled concerns of higher selling prices or diminished profits for U.S. corporations in those industries. Furthermore, some feared other countries could retaliate with their own tariffs on goods the industrial sector utilizes. Industrial ETFs, including the Industrial Select Sector SPDR (NYSEArca: XLI), the largest exchange traded fund tracking industrial stocks, have suffered outflows in the wake of the tariff announcement.
Conversely, investors are showing some enthusiasm for materials ETFs, including the Vanguard Materials ETF (NYSEArca: VAW).
“Last week, investors poured a record $334 million into the Vanguard Materials ETF, ticker VAW. At the same time, they pulled $96 million from the Vanguard Industrials ETF, ticker VIS, the largest amount in more than a year. It’s a classic rotation — grab exposure to the expected winners and dump the potential losers,” reports Bloomberg.