In the wake of President Donald Trump’s tariff on Chinese imports, Beijing countered with plans to impose trade barriers of its own, dragging down solar and metal mining related exchange traded funds Friday.
Among the worst performers Friday, the SPDR Metals & Mining ETF (NYSEArca: XME), which has a hefty tilt toward U.S. steel, fell 2.4% and the Invesco Solar ETF (NYSEArca: TAN), the largest ETF dedicated to solar stocks, declined 3.0%.
Washington D.C. imposed a 25% tariff on $50 billion in Chinese goods Friday. In response, China’s Ministry of Commerce said it would tack on trade barriers of the “same scale and the same strength,” and that Trump’s tariffs were “damaging” relations and “undermining the world trade order,” the Washington Post reports.
According to the White House, the import tax would apply to “goods from China that contain industrially significant technologies.” The administration argued that China forced foreign companies to surrender technology secrets in return for market access and acquired U.S. technologies through cybertheft and investment in start-ups.
“These practices… harm our economic and national security and deepen our already massive trade imbalance with China,” Trump said.
Trump’s Tit-for-Tat Trade War
Potentially escalating tensions into a tit-for-tat trade war, the president stated the U.S. would “pursue additional tariffs” if China responded.
China has exhibited a history of focusing on industries like steel or solar energy for growth, which came with excessive investment by its state-led firms. The actions would in turn flood global markets with cheap Chinese goods, pressuring prices to unsustainable levels and making it all but impossible for private companies to compete, a White House senior administration official said. Consequently, the official argued that American companies will continue to lose out on a range of advanced technology markets if China’s state-led companies maintain their current industrial policies.
“This is not market capitalism,” the official said, speaking anonymously to the Washington Post. “These are state policies where they are targeting certain industries.”
Related: Precious Metals ETFs Tumble as Trade Tensions Escalate
The solar sector looked dimmer this year after tariffs on solar panels caused U.S. renewable energy companies to cancel or freeze investments on over $2.5 billion in large installation projects.
The new, diluted tariff scheme excludes many of the largest importers of steel to the U.S. The steel tariff program appears to have less bite than many initially feared, as a number of key steel exporters to the U.S. have now received temporary exemption.
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