On Thursday, President Donald Trump imposed a new set of tariffs and trade restrictions on $60 billion of Chinese goods, sending the Dow Jones industrial average tumbling more than 700 points. Investors are troubled by the potential for a U.S. trade war with China, and Amazon.com, Inc. (Nasdaq: AMZN) is the one FANG stock that could see an impact.
As a whole, GBH head of technology research Daniel Ives says Amazon, Facebook ( FB), Netflix ( NFLX) and Alphabet ( GOOG, GOOGL), collectively known as FANG, should withstand a trade war with China. “We continue to strongly believe that given the primarily services nature of traditional FANG names and very internationally distributed from a revenue perspective, that Facebook, Amazon, Netflix and Google/Alphabet are primarily insulated from tariff worries and a potential retaliatory trade war with China,” Ives says.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
While a trade war with China may not have a big impact on FANG stocks, Ives singled out Amazon as the one company that could theoretically be impacted by rising costs.
“In a draconian scenario, depending on how far the potential China/U.S. trade war goes, there could be some crosshairs that negatively impact Amazon on the e-commerce front … although these would be negligible with a 1 to 2 percent maximum increase in costs on some items and not a concern at all,” Ives says.
U.S. tariffs will specifically target technology, an area where the Trump administration says China has demonstrated abusive trade practices and stolen American companies’ intellectual property. A full list of the Chinese products subject to the new tariff will be revealed in 15 days, but the list reportedly includes aeronautics, modern rail, alternative energy vehicles and high-tech products.
Commerce secretary Wilbur Ross downplayed the impact of potential Chinese retaliation. “There will be some ultimate retaliation, but I don’t think it’s going to be the end of the earth,” Ross says.
[See: 7 of the Best Stocks to Buy for 2018.]
Fortunately for tech investors, U.S. trade officials expect China’s retaliation to target American agriculture, not technology.
GBH has a “highly attractive” rating and $1,850 price target for AMZN stock.
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How Amazon.com, Inc. (AMZN) Can be Hit in a Trade War originally appeared on usnews.com
