My No. 1 Trade War Play [You’ll Never Guess It]
Trade tensions escalated again last week as President Trump upped the ante on tariffs against Chinese imports.
Predictably, Beijing responded with threats of retaliation on U.S. goods.
On top of ongoing trade tensions, you can now add rising geopolitical uncertainty to the mix. Turkey’s currency is quickly following the same path to perdition as the Venezuelan bolivar, sparking fears of an emerging-market currency crisis.
For the moment, those fears seem overblown to me, but currency contagion is always a wild card risk. The clear and present danger is a global trade war. But even during the worst of this trade battle there are winners in the market.
You just need to know how to sort them out to profit from rising trade tensions.
Take soybeans for example: The clear losers are soybean future prices, as you can see in the chart below. Not to mention American farmers who produce soybeans for export to Asia.
Soybeans are the top crop for imports from the U.S. to China, by far. In fact, about 60% of the $20 billion of U.S. agricultural exports to China are oilseed used to make cooking oil and animal feed, according to Bloomberg.
This one tariff alone could cost American farmers $4.5 billion in lost shipments.
But there are also winners to be found, if you know where to look.
Brazil, for example, is the world’s leading exporter of soybeans, accounting for more shipments worldwide, and especially to Asia. Brazil stands to greatly benefit from China’s tariffs on U.S. soybeans in a big way.
China is the world’s largest consumer of soybeans, not to mention many other commodities. And Brazil stands ready to fill the void from the U.S. trade sanctions. The South American nation already sends 48 million metric tons, versus the U.S.’ 37.5 million.
Who, specifically, stands to benefit?
One company that has a leading position in the Brazilian soybean export trade is Bunge (NYSE: BG), which last year accounted for over 13% of Brazil’s soybean exports.
Bottom line: Nobody wins a trade war, but some companies are well positioned to benefit from it.
Brazil’s Bunge could be one of those winners, and if you hitch your wagon to them, you could be too.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch