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Trade War & Earnings
A Telling Month.
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Wall Street is reacting to some massive shifts,
…and if you're not paying attention, you could be caught off guard. If you are hearing about this 2025 trade war, international AI developments, or the Department of Government Efficiency for the first time, believe me, you are still ahead because most USA consumers remain clueless.
Let us simplify the chaos on Wall Street.
You are responsible for your decision-making and preparedness in the midst of change, whether for or against the progression.
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1. The Trade War: What It Is and Why It Matters
The U.S. slapped 25% tariffs on imports from Canada and Mexico and 10% tariffs on Chinese goods. This makes imported goods more expensive, leading to retaliation from these countries. (Reuters)
The Retaliation:
In response to the United States imposing tariffs on imports from Canada, Mexico, and China, these countries have announced or are considering retaliatory measures against U.S. goods:
Canada:
Retaliatory Tariffs: Canadian Prime Minister Justin Trudeau announced that Canada will impose 25% tariffs on U.S. goods worth approximately $155 billion. These tariffs target a range of American products, including consumer goods such as alcohol, appliances, furniture, perfume, and sports equipment. The initial phase will affect $30 billion worth of goods, with additional tariffs to follow.
Mexico:
Planned Countermeasures: Mexican President Claudia Sheinbaum has ordered the implementation of retaliatory tariffs in response to the U.S. imposing 25% tariffs on Mexican goods.
China:
WTO Complaint and Potential Countermeasures: China's Ministry of Commerce announced plans to file a complaint with the World Trade Organization against the U.S. tariffs and has indicated that it will take corresponding countermeasures to safeguard its rights and interests. Specific retaliatory actions have not been detailed yet.
These developments indicate escalating trade tensions, with each country taking steps to protect its economic interests in response to U.S. tariff policies.
Who Does This Impact?
Note:
Companies like Walmart or Target may feel this impact harshly because they import products from China to U.S. warehouses in bulk, meaning they get hit with tariffs. Your favorite Chinese shopping apps like Temu and Shein, would be less impacted, but since Trump has fought to eliminate the de minimis rule, the changes still apply.
De minimis - Orders under $800 avoid tariffs (thanks to a loophole called the de minimis rule).
Negatively Impacted U.S. Stocks
❌ Apple (AAPL) – Relies on China for manufacturing; higher costs could lower profit margins
❌ Tesla (TSLA) – Sells a large percentage of cars in China, where retaliatory tariffs could hurt sales
❌ Nike (NKE) – China is a key market for sales and production, and tariffs could lower demand
Retail will get hit the hardest.
Positively Impacted U. S. Stocks
✅ Caterpillar (CAT) – If domestic manufacturing picks up, equipment sales could rise
✅ Steel Dynamics (STLD) – U.S. steel producers could see demand increase if imported steel is taxed heavily
✅ Deere & Co. (DE) – Agricultural equipment could see increased demand if U.S. farmers produce more domestically due to trade tensions.
✅ Alternative Play: UPS (UPS) & FedEx (FDX)
Companies with global supply chains may shift to more flexible shipping solutions.
Increased shipping costs from tariffs could lead to demand for logistics optimization services.
In General, This Affects Everyday People By…
💰 Higher Prices – Tariffs make goods more expensive, so expect price hikes on cars, phones, and clothes
🏠 Job Uncertainty – If trade tensions get worse, businesses may cut jobs to offset costs
How to Withstand the Punch
✔ Buy local products – Support businesses that aren’t impacted by tariffs
✔ Negotiate costs in business – If you own a business, look for alternative suppliers in tariff-free regions
✔ Invest in companies that benefit – Stocks like Caterpillar or U.S. steel companies could see gains
SWS Take:
This trade war is a calculated risk—the U.S. prioritizes economic independence over short-term market stability. Tariffs often hit consumers and businesses hardest, so while some industries may benefit, the average American is likely to pay more for everyday goods.
There are talks of eliminating income taxes; before this can be completed, the Tariffs must be successful. This means that for a long period of time, we will feel the effects of Tariffs while still paying federal/state taxes.
Other Companies That Can Rise
Defense spending tends to rise in times of global trade tensions.
1. Palantir Technologies (PLTR):
Role: Specializes in data analytics and artificial intelligence for defense and intelligence agencies.
Benefit: Increased defense budgets could lead to more contracts for advanced data analysis and AI-driven solutions.
Insight: Investors anticipate that higher federal spending on national security will benefit Palantir, as evidenced by a significant increase in its market capitalization following recent elections.
2. Northrop Grumman (NOC):
Role: Produces military aircraft, autonomous systems, and cybersecurity solutions.
Benefit: Rising geopolitical tensions have led to increased demand for military equipment, boosting Northrop Grumman's profits.
Access the full list here.
China’s Standalone Strength: Why They Aren’t Afraid of Tariffs
While U.S. tariffs are hurting some Chinese businesses, companies like Alibaba (BABA) and NIO (NIO) are showing resilience. China has been building its own AI models and supply chains, making them less reliant on Western imports. (Reuters)
Investment Opportunities
✅ Alibaba (BABA) – Expanding AI and e-commerce dominance
✅ NIO (NIO) – Strong EV manufacturer gaining ground in China
✅ BYD (BYD) – China’s largest EV company, backed by Warren Buffett
🚗 China’s cars and tech are improving – If tariffs increase, China might fully develop its own versions of U.S. tech
📉 Chinese stocks are volatile – China’s market is unpredictable, but high-growth companies still exist
We have mentioned many of these names in our private Discord, and various investment choices have tripled in price.
2. DeepSeek and the AI Upheaval: Is Nvidia in Trouble?
Chinese AI company DeepSeek just launched a powerful and cost-effective AI model that doesn’t require high-end chips from Nvidia. This has shaken the AI industry and forced investors to rethink where AI is headed.
Negatively Impacted Stocks
❌ Nvidia (NVDA) – DeepSeek's AI proves AI can work without expensive Nvidia chips
❌ AMD (AMD) – Another major chipmaker that could see reduced demand
❌ Intel (INTC) – Competing in AI chips, but DeepSeek's model could limit its market
Positively Impacted Stocks
✅ Meta (META) – Meta uses open-source AI, which aligns with DeepSeek's model
✅ Palantir (PLTR) – Data analytics company that could benefit from more accessible AI tools
✅ Google (GOOGL) – If open-source AI advances, Google's AI products could evolve faster
On the contrary, Alternative Play: ASML (ASML)
ASML makes highly specialized semiconductor equipment that China still relies on.
Even if Nvidia slows down, China still needs ASML’s machines to build its own AI chips.
Keep in mind that $NVDA chips are still used in China and worldwide.
How This Affects Everyday People
🤖 AI is getting cheaper – Companies using AI may pass savings to customers. On the flip side… Tech jobs may shift – Chip-heavy industries could slow hiring while AI software jobs grow.
How to Withstand the Punch
✔ If you work in tech, start learning AI integration – The demand for software-driven AI is increasing
✔ If investing, shift from chip stocks to AI software – Nvidia was once the golden AI stock, but the shift is happening fast
✔ Use AI for business productivity – AI is becoming cheaper and more accessible for small businesses
Personal Take:
The biggest takeaway here is that AI is evolving faster than we expected. This isn’t just a Nvidia problem—it’s a shift in how AI is built and deployed. If you're investing in AI, look beyond just chips—software and data-driven AI companies are the new leaders.
Investing perspective:
I like $INTC (Intel) as the underdog. While 75% of Intel's semiconductor fabrication is done in the U.S., assembly and testing take place in countries like China, Malaysia, and Vietnam. It would be interesting if a company like AMD or NVDA entertained a merger.
The DOGE Group: Elon Musk’s Plan to Cut Government Waste
Elon Musk’s Department of Government Efficiency (DOGE) is an effort to cut wasteful government spending. Musk has repeatedly said that overspending leads to inflation, arguing that the government should “stop printing money” and “cut back like a business would.”
How This Affects Everyday People
🏛 If this program is successful, it could lower inflation – Cutting waste could improve the economy long-term
📉 Stock market could dip before stabilizing – Short-term pain for long-term stability
How to Withstand the Punch
✔ If your job depends on government spending, have a backup plan
✔ If investing, be patient—long-term reforms take time
Personal Take:
Our government has not been responsible with taxpayer dollars. If this assumption is correct, then this could be "ripping the band-aid off and pouring salt in the wound." Cutting spending won’t be painless, but it could lead to a more sustainable economy if done correctly.
Only time will tell.
Notable News
WINNING: THIS IS HUGE
Temu, SHEIN and all these tacky fast fashion companies that sell mostly crap have long relied on an unfair and unwarranted trade advantage.
They have long been beneficiaries of what is called the "de minimis loophole."
This loophole allows goods to be… x.com/i/web/status/1…
— Melissa Chen (@MsMelChen)
2:23 PM • Feb 2, 2025
2 plane crashes
trade wars
high inflation
expensive eggs
gas prices soaring
J6 MAGAs arrested for child porn
Nazi saluts
FAA controllers quitting
Melania kissing NewsomIt's only been 10 days.
— Alex Cole (@acnewsitics)
12:19 AM • Feb 1, 2025
MEXICAN PRESIDENT SHEINBAUM: U.S. HAS DONE NOTHING TO STOP ILLEGAL SALE OF DRUGS IN ITS OWN COUNTRY
— *Walter Bloomberg (@DeItaone)
8:01 PM • Feb 2, 2025
Earnings Week
This week is packed!
— The Long Investor (@TheLongInvest)
10:19 AM • Feb 2, 2025
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