VIEW Reaction to U.S. trade deal with Japan
1. U.S. and Japan reached a trade deal imposing a 15% tariff on imports. 2. The tariff could affect trade dynamics, influencing Japanese stocks, including EWJ.
FAQ
Why Bearish?
The 15% tariff on Japanese imports may lead to reduced profit margins for Japanese companies, negatively impacting equity prices in the EWJ ETF which includes those companies. Historical precedents show tariffs often lead to declines in stock prices as operational costs escalate and market sentiment turns pessimistic.
How important is it?
The tariff directly impacts the economic relationship between the U.S. and Japan, where many EWJ constituents have substantial U.S. market exposure. Given the size of the tariffs, there is a reasonable probability that the ETF’s performance could diminish as a direct result of this policy change.
Why Short Term?
The immediate reaction to tariffs is typically swift, affecting stock prices in the short term. A recent example is the impact of tariff announcements in 2018, which led to quick declines in related equities.