How Investors Are Protecting Portfolios with Trade War Fears


It’s always a good idea to prepare for volatility.

The trade war with China may have cooled off. But one is intensifying with the European Union (EU), where President Trump could add tariffs on $4 billion of EU goods, covering 89 products including meat, cheese, pasta, fruits, coffee, and whiskey. All as the U.S. remains locked in a dispute with the EU over two of the world’s biggest airplane manufacturers – Boeing and Airbus.

The additions to the list are "in order to enforce U.S. rights in the World Trade Organization (WTO) dispute against the European Union (EU) and certain EU member States regarding EU subsidies on large civil aircraft," according to the Office of the U.S. Trade Representative.

President Trump has also threatened to tack on tariffs of up to 25% on cars coming into the U.S., a move that could easily hit European auto hotspots like Germany and France. All come just months after Trump imposed a 25% tariff on European steel and aluminum imports.


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However, U.S. Companies are Opposed

The Distilled Spirits Council of the U.S. criticized the tariff threats and warned they would jeopardize US jobs and hurt consumers.  

“We strongly oppose the inclusion of distilled products in the proposed retaliation list they said.  “US companies – from farmers to suppliers to retailers – are already being negatively impacted by the imposition of retaliatory tariffs by key trading partners on certain US distilled spirits ... and these additional tariffs will only inflict further harm.”

Even executives at Airbus have said “this only adds to the trade tensions but in reality, does not change anything.” The level of retaliation is set by the WTO, the European plane maker said, as quoted by The Wall Street Journal, adding the U.S. move made negotiating a solution harder and could result in a “lose-lose situation” for industries on both sides.

This and the China trade war can still have a negative impact on markets.

It’s why some investors have begun to push back into volatility-related trades, including:

- The iPath S&P 500 VIX Short-Term Futures ETN (VXX)

- The ProShares Ultra VIX Short-Term Futures (UVXY)

- The VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

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