The 100 day-trade plan between the U.S. and China reached its first result this month, with the release of a 10-point trade deal. It promises to boost market access between the two nations in agricultural products, energy, financial services and investment. The trade talks, which began last month with a meeting between U.S. President, Donald Trump, and Chinese President, Xi Jinping, are seen as a big turnaround from Trump\u2019s election rhetoric which almost slammed China\u2019s trade practices for harming U.S. employment.<\/p>\n
While the terms of the new deal could spell good news for some U.S. companies, whether they can substantially narrow down the nation\u2019s overall trade deficit with China (which touched $347 billion last year) is something that\u2019s too soon to predict. Also, as we all know, the stages between promises and implementation often take time to unfold.<\/p>\n
Nevertheless, the deal does cool off speculations of a trade war between the U.S. and China – at least for now.<\/p>\n
We take a look at some of the key highlights of the trade pact, and what opportunities they could potentially offer for the U.S. economy below:<\/p>\n
Beef and Poultry:<\/em><\/strong><\/p>\n By July 16, the Chinese will be able to have American beef, thanks to the new trade deal. China banned U.S. beef imports in 2003 following a mad-cow disease scare. The restriction was relaxed \u2013 only conditionally – last year. The new terms open gates for a more unhindered flow of U.S. beef exports to China. At the same time, the deal makes way for Chinese poultry\u2019s access to U.S. markets.<\/p>\n This should spell good news for U.S. firms with global food supply-chains, such as Cargill which also has poultry operations in China.<\/p>\n Agricultural Biotech:<\/em><\/strong><\/p>\n The new deal promises to facilitate U.S. biotech seeds\u2019 entry into China. Earlier, China had barred genetically modified seed imports from the U.S. on several instances, citing safety concerns. The new deal seeks to request that the Chinese authorities make a decision on American firms\u2019 outstanding applications for Food Safety Certificates.<\/p>\n This move should spur some hope for companies like Du Pont and Monsanto, although it does not guarantee the approval for sale.<\/p>\n \u00a0Energy:<\/em><\/strong><\/p>\n The new trade deal seeks to encourage China to strike contracts \u2013 including long-term ones – for purchasing liquefied natural gas (LNG) from the U.S. China is the fastest growing market of LNG (according to energy research firm Wood Mackenzie\u00a0). So, access to the burgeoning demand offers a big opportunity for U.S. drillers and natural gas exporters.<\/p>\n However, chances of a near-term jump in U.S. LNG exports to China look slim. In addition to competition from other players, such as Australia and Qatar, there are capacity limitations that the U.S. has to work around before it can supply fuel to China.<\/p>\n Electronic Payments: <\/em><\/strong><\/p>\n American credit card companies such as MasterCard,\u00a0Visa and\u00a0American Express look set to access their next big customer base. Even after a 2012 ruling by WTO that mandated China to open its financial market to foreign companies, some regulatory hurdles discouraged U.S. firms from applying for licenses to offer yuan-denominated credit cards. But now, the new trade deal promises to open the floodgates for U.S. credit card businesses to have more prompt licensing procedures to participate in yuan-denominated markets.<\/p>\n How far this opportunity would yield results for U.S. payment services firms over time will depend on how much share they can manage to grab in a market already dominated by local players like UnionPay.<\/p>\n Other Financial Services:<\/em><\/strong><\/p>\n The pact mentions that China would grant licenses for bond underwriting and settlement to two qualified U.S. financial institutions by July 16. The names of the two recipients are unidentified as of now.<\/p>\n Additionally, the trade deal claims to allow credit rating agencies such as Moody\u2019s and Standard & Poor\u2019s to operate in China, even as wholly-U.S.-owned <\/em>companies. This could potentially bolster U.S. agencies\u2019 overseas expansion and broaden their scope of risk assessment for Chinese corporate securities.<\/p>\n Bottom Line for Investors<\/strong><\/p>\n Compared to murmurs of trade war possibilities not too long ago, the new U.S.-China trade deal is a glimmer of hope for American companies in industries covered in the deal. However, for opportunities to progress into tangible gains, much depends on the final<\/em> stages of regulatory approvals \u2013 which do not manifest overnight. Plus, there are capacity issues to resolve and competition to strategize before U.S. players can invest towards their expansion in Chinese markets.<\/p>\n The new deal may not be a major needle-mover for U.S. trade balance with China in the near-term, but over time it could help in bolstering U.S. exports to China, unless<\/em> there\u2019s a marked departure of regulatory verdicts from the deal\u2019s potential.<\/p>\n While investors may find it important to stay up-to-date on the evolving dynamics of U.S.-China relations, it doesn\u2019t hurt to plan one\u2019s investment strategy for the long-term. That\u2019s because regulatory or geopolitical developments alone don\u2019t seal a company\u2019s fate.<\/p>\n At Zacks Investment Management, we realize that the most crucial factors that underlie a company\u2019s long-term prospects are fundamentals, <\/em>and we leverage independent research on these factors, to help our clients reap long-term rewards. At the same time, we steer clear of a \u201ccookie-cutter\u201d approach: we understand that every investor has their unique financial goals and risk tolerance, and therefore, design a customized investment portfolio for every client. To learn more, feel free to call us at 1-888-600-2783.<\/p>\n","protected":false},"excerpt":{"rendered":" The 100 day-trade plan between the U.S. and China reached its first result this month, with the release of a […]<\/p>\n","protected":false},"author":1,"featured_media":7515,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,72],"tags":[],"class_list":["post-6429","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investor-news"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=6429"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6429\/revisions"}],"predecessor-version":[{"id":11016,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/6429\/revisions\/11016"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=6429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=6429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=6429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}