April 4, 2018 / 4:43 PM / 18 days ago

China trade retaliation puts stocks of U.S. exporters in spin

(Reuters) - Shares in U.S. exporters of everything from planes to tractors fell on Wednesday after China retaliated against the Trump administration’s tariff plans by proposing duties on key U.S. imports including soybeans, planes, cars, beef and chemicals.

FILE PHOTO- Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., March 22, 2018. REUTERS/Brendan McDermid

China was hitting back against U.S. President Donald Trump’s plans to impose tariffs on $50 billion (35.51 billion pounds) in Chinese goods with similar tariffs on U.S. goods even as Trump’s top economic adviser Larry Kudlow said the administration was involved in a “negotiation” with China rather than a trade war.

Industrial stocks appeared to be the hardest hit. Shares in U.S. aerospace giant Boeing Co were last down 2.5 percent making it one of the biggest drags on the S&P 500 though it was not immediately clear how much the tariffs would affect Boeing’s newer products. The United States exported $15 billion of aircraft to China in 2016, ranking the sector equally with agricultural products like soybeans, according U.S. trade data.

General Motors shares reversed earlier losses and were last up 1.5 percent but the No. 1 U.S. automaker called for constructive U.S./ China dialogue, citing an “interdependence between the world’s two largest automotive markets.”

Agricultural machinery maker Deere & Co was down 4.0 percent and DowDuPont Inc was down 1.3 percent.

Eli Lustgarten, industrial outlook consultant at ESL Consultants, St Louis said he was more concerned about the impact to food commodity exports, which would hurt Deer’s U.S. farm customers, than the impact on farm equipment exports.

Soybean exporter Archer Daniels Midland Co and another agribusiness Bunge Ltd reversed their premarket losses and were last up more than 1 percent.

Some analysts saw a silver lining for meat producers though. Mizuho analyst Jeremy Scott said soybeans will be stranded on the U.S. market, cutting costs for U.S. meat companies.

Investors in the S&P 500’s technology sector were also rattled since it has the biggest revenue exposure to China out of the benchmark’s 11 major sectors. Chipmakers such as Nvidia Corp, with a 1.4 percent drop, and Intel Corp, with a 0.8 percent decline, were among the biggest percentage losers in that sector.

“These are some of the companies most exposed to potential tariffs. They would affect their business directly, immediately.” said Brad McMillan, chief investment officer of Commonwealth Financial Network in Waltham, Massachusetts.

Shares of Caterpillar, also a big exporter to China, fell 1.2 percent.

With the three major U.S. indexes well off their January records after taking a massive tumble on Feb. 9, at least some investors were hoping U.S. stocks will bounce back if earnings growth meets strong Wall Street forecasts in the first-quarter reporting season, which starts this month.

“Obviously we need kind of a quiet period on these headlines and we need to focus on what is ultimately important and that is earnings. So I am hopeful over the next couple of weeks that earnings will be that shiny object that everyone can focus on,” said Jack Ablin, chief investment officer at Cresset Wealth in Chicago.

Additional reporting by April Joyner, Charles Mikolajczak and Lewis Krauskopf in New York, Taenaz Shakir in Bengaluru; Editing by Jeffrey Benkoe and David Gregorio

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