Goldman Sachs says companies with strong and sustainable profit margins can rise even if the trade war with China escalates, CNBC reported.
“Trade tensions remain in the spotlight as tariffs on $200 billion of imports from China were implemented … and more tariffs look likely to come. Tariffs threaten corporate earnings through higher costs and lower margins,” Goldman’s chief U.S. equity strategist David Kostin said in a recent report.
The Trump administration has slapped tariffs on $200 billion worth of Chinese goods last month and is threatening to impose duties on virtually all of the goods China exports to the United States, Reuters reported.
President Donald Trump has said signs of economic weakness in China and its slumping stock markets are proof of the effect U.S. tariffs are having on the Chinese economy. Still, Beijing has remained defiant, vowing to stimulate domestic demand to cushion the blow from any trade shocks.
“As the boost from tax reform fades, firms with the ability to maintain or expand profit margins will become increasingly scarce and will likely be rewarded by investors,” he said, according to CNBC.
He suggested seven stocks:
- Adobe (ADBE)
- Amgen (AMGN)
- Celgene (CELG)
- Flowers Foods (FLO)
- PVH (PVH)
- Scotts Miracle-Gro
- VMWare (VMW)
Meanwhile, Harvard economist Martin Feldstein says that President Donald Trump’s economic tariffs on China are essentially a necessary evil imposed on American consumers in an attempt to halt Beijing from stealing U.S. firms’ technology
“I oppose tariffs in general. I, too, prefer an environment in which governments do not interfere with imports and exports, and in which U.S. firms can operate freely in foreign countries,” Feldstein wrote for Project Syndicate.
Feldstein is in good company with his disdain for the tariffs.
Forbes magazine owner Steve Forbes warns that trade tariffs are really just sales taxes in disguise and both consumers and business will be better off once they are removed.
“Tariff is another word for sales tax,” Forbes told "The Cats Roundtable" on 970 AM-N.Y.
"The quicker we get rid of these (tariffs), the better off consumers will be, the better off businesses will be," Forbes told host John Catsimatidis. "When you hear 25 percent tariff on autos, that’s the equivalent to a 25 percent sales tax on automobiles," the chairman and editor-in-chief of Forbes Media explained.
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