Watch These ETFs As Trade War Risks Rise

The materials sector is attracting a lot of investor attention lately. Industrial Metals have been rebounding on greater global optimism. This is primarily due to robust global growth cues and strong demand.

However, the relation between the United States and its trade partners is not so sweet right now, with fears of a potential trade war looming large. “We’ll be imposing tariffs on steel imports, and tariffs on aluminum imports. And you’re going to see a lot of good things happen,” Trump said. Trump’s America First agenda has sparked fears of a trade war, as he told steel and aluminum industry executives in a meeting about his intention to implement a 25% tariff on steel imports and a 10% tariff on aluminum imports.

Trump’s tariff plan “is bad policy at a bad time and will only add to the risk of a trade war,” per a New York Times article citing Shane Oliver, head of investment strategy at AMP Capital.

Into the Headlines

Trump said the tariffs will be introduced as early as next week. However, it is not yet clear if any specific product or country will be excluded from the arrangement. American stocks for companies that use the metals took a beating as a result of this announcement.

The U.S. measures “overturn the international trade order,” per a Bloomberg article citing Wen Xianjun, vice chairman of the China Nonferrous Metals Industry Association. “Other countries, including China, will take relevant retaliatory measures,” Wen added.

Japan voiced its concerns too. “Steel and aluminum imports from Japan, which is an ally, do not affect U.S. national security at all,” Japan’s Trade Minister Hiroshige Seko told reporters in Tokyo. “I would like to convey that to the U.S. when I have an opportunity,” Seko added.

American companies have for long criticized Chinese practices, as they complain that Chinese companies dump their products at below-market prices, thanks to the state subsidy they receive. However, America can expect retaliatory measures from China, as the emerging market nation is the largest producer of steel and aluminum. Among the biggest concerns, China is evaluating trade of soybeans and other farm products with the United States, which might weigh on American farmers and ultimately on Trump’s support among rural Americans and Republican strongholds.