U.S. trade policy with China can be as fun as watching paint dry. Since June 2018, President Donald Trump has declared tariffs on China for unfair trade practices.
We are over one year into trade tariffs, and with ever-increasing pressure this year, the market has become weary of getting a resolution. Even now, the market continues to hinge on if the talks are on or off and who’s in Washington from China.
One thing is for certain: The U.S. and China are slowly de-coupling our economies and it is a bipartisan position that is supported in Washington D.C. — one that will continue long after the 2020 election and decades into the future.
There have been recent comments in the past week that our U.S. trade negotiations team are interested in de-listing Chinese stocks from the American stock exchanges, removing Chinese companies from being included in government pension funds, limiting stock index providers from including Chinese stocks, and stopping direct U.S. investment in Chinese companies.
The basis for the recommendation would be to protect U.S. investors from a lack of transparency and manipulated corporate reporting by Chinese companies that lack full disclosure.
Make no mistake about it, this is a leverage position to put pressure on the Chinese to come to the table and at least have a truce.
In the last 30 days (around the time that the news that President Trump was considering curbing U.S. investment in China came out), the Shanghai index and China’s ecommerce giant, Alibaba, have seen values decrease.
As a note of reference to funds you may own, T. Rowe Price holds a 2.51 percent stake in Alibaba, which has a market cap greater than Amazon and eBay.
Also, we have witnessed a massive negative reaction by Chinese authorities to a tweet from the general manager of the NBA’s Houston Rockets. The tweet was in support of the Hong Kong protestors. Now the $4 billion value of the NBA’s market in China is in question.
Even if the threat of pulling U.S. investment in China is overblown, maybe it is time for investors to more clearly understand that their investment dollars are supporting the Chinese Communist Party that controls China.
China’s history of human rights violations has been widely documented for years. Individual rights in China are nowhere near what we have in America. There are over 1.5 million people (the Uighur) in western China in prison camps because they are Muslim and supposedly pose great risk to Chinese society.
The U.S. Congressional-Executive Committee on China describes the imprisonment of the Uighur Muslims in China as “the largest mass incarceration of a minority population in the world today.”
The concern is real regarding giving U.S. investment dollars to a country that has been working for decades to weaken our rights and freedoms. There is no free market there.
Contrary to what the global elitists will tell you, we cannot betray our American ideals just to make a buck in the world’s second-largest economy. It is morally wrong, financially dangerous and our investment dollars are undermining our national security.
Danny Wood is an independent financial advisor and owner of SeaCoast Financial Partners in Bradenton. To learn more visit MySeaCoastfinancial.com.