In the current environment of increased trade barriers, ETF investors should consider the relatively nimble nature of robotics and A.I. in the international markets and look to a strategy to diversify into this growing industry.
On the recent webcast (available On Demand for CE Credit), Tech, Trade Wars and the Market: How to Position Your Portfolio, Travis Briggs, CEO of ROBO Global U.S., pointed to the ongoing U.S. and China trade war that has topped the list of investors’ concerns.
“As the trade war between the US and China continues to escalate, the tariffs and barriers on imported products threaten to slow business activity, create supply chain friction and dampen international trade – not only between the two countries themselves but around the globe,” Briggs said. “No one wins a trade war.”
The trade war has been partially sparked by the alleged unfair transfer of American technology and intellectual property to China, according to President Donald Trump. China’s push to innovate, specially the government’s initiative called Made in China 2025, is seen as a threat to U.S. technology companies. In response to that threat, the Trump administration announced tariffs aimed directly at many of the robotics, automation and artificial intelligence-specific industries key to China’s plan, including aerospace, automobiles, information technology and robotics.
While tariffs may be bad news for some industries, such as U.S. agriculture, the trade barriers may help give U.S. innovators a leg up on the global tech field.
“For companies in the U.S. and abroad that are delivering today’s most innovative products and technologies in robotics, automation and A.I., the trade war is bound to be nothing more than a blip the size of a robot’s microchip, at least in the short-term,” Briggs said.
Robotics, Artificial Intelligence & Tariffs
Specifically, Briggs argued that those focused on robotics and artificial intelligence may barely feel the effects of tariffs. China isn’t a big enough competitor in robotics and supply chain yet, and it is lagging behind in the global export market for advanced technologies.
“The tariffs that have been imposed to date – though it’s clear there are more to come – are not likely to make a difference to the global supply chain for robotics,” Briggs said.
Trade restrictions can also significantly raise the cost of maintaining global supply chains, which may result in a re-shoring of some production processes coupled with heavy automation.
Nevertheless, in an increasingly interconnected global economy, a disruption in one area of the globe will inevitably affect others.
“Serious disruption to these very globalized supply chains would raise the cost of building robots, which would be bad news for the pace of adoption. So we’ll have to watch closely how this plays out,” J.H. Cullum Clark, Director at Bush Institute-SMU Economic Growth Initiative, said.
Furthermore, Clark warned of other pitfalls, including new destabilizing dynamics into geopolitics and national security, white collar disruption and productivity gains that may not impact low-skilled occupations.
Investors who are interested in gaining exposure to the potential growth in robotics, automation and artificial intelligence can look to something like the ROBO Global Robotics & Automation Index ETF (NYSEArca: ROBO).
“As we’re in the very early stages of adoption, companies that lead in providing A.I. tools will very likely grow faster than most public companies. History suggests that the stock market tends to under-appreciate the scale of the opportunity enjoyed by leading companies in the early stage of adoption of new technologies,” Clark said.
ROBO’s underlying index has exhibited a proven track record, is backed by an expert team and exclusively focuses on robotics. It has also been outperforming major benchmark indices and emerging competitors. Potential investors may look to ROBO to capitalize on solutions for emerging global trends, from decreasing productivity growth to demographic shifts.
Financial advisors who are interested in learning more about robotics and artificial intelligence investments can watch the webcast here on demand.