Donald Trump, once again elected as President of the United States, is yet to officially assume office.

However, his well-publicized promise to enforce new tariffs on Chinese goods has already sent ripples through the global business community.

Having triggered a substantial production shift away from China during his first tenure in 2016, Trump’s latest proposal—60% or higher tariffs on Chinese imports—has revived those concerns.

With potential 20% tariffs on all foreign-made products, US and international companies are strategizing quickly to minimize exposure to such economic penalties.

Steve Madden to cut production in China by half

Among the first to act is Steve Madden, the American fashion retailer renowned for its popular footwear and accessories.

CEO Edward Rosenfeld revealed that the company, which imports over 70% of its US inventory from China, has moved swiftly to shield itself from the expected economic fallout.

Rosenfeld announced plans to slash its China-based production by nearly half within the coming year, pivoting instead to factories in Vietnam, Cambodia, Brazil, and Mexico.

“We have been planning for a potential scenario in which we would have to move goods out of China more quickly,” Rosenfeld stated on a call following its earnings on Thursday.

“As of yesterday morning, we are putting that plan in motion.”

This proactive measure follows years of diversifying the company’s production base to mitigate risks associated with concentrated sourcing in China.

Still, Rosenfeld admitted that maintaining supply chains outside of China presents logistical and operational challenges that companies must navigate carefully.

Breville to move production away from China

Australian appliance giant Breville, known for its premium kitchen devices, echoed a similar shift in response to Trump’s policy promises.

Speaking to shareholders during its annual meeting on Thursday, Breville CEO Jim Clayton said, “Now that [Donald] Trump has won the US Presidential election, the near-term risk of material tariff increases on consumer goods coming out of China has solidified.”

Clayton stated that the company is already taking action in response to Trump’s election, including accelerating the relocation of more of its production out of China to shield itself from potential new US tariffs.

“We will continue our inventory build in the US, unabated, likely until the increased tariffs are enforced,” Clayton said.

The Australian company markets appliances like espresso machines, toasters, juicers, and microwaves in over 70 countries, including the US.

The majority of its products are produced in the region surrounding Shenzhen, a vast Chinese city located near the Hong Kong border.

Breville has longstanding relationships with Chinese manufacturers around Shenzhen, a major industrial hub.

Clayton acknowledged that while these partnerships have historically allowed the company to maintain competitive pricing, the risk of impending tariffs has forced an adjustment in strategy.

This tactic builds on Breville’s previous crisis management during the COVID-19 pandemic, which involved stockpiling goods to buffer against supply chain disruptions.

Yet, experts warn that holding excessive stock comes with risks, such as potential shifts in consumer demand that could erode profit margins.

Apart from Steve Madden and Breville, Church & Dwight Co. is also shifting some of its production out of China, particularly for its Waterpik oral-care line.

“There are plans in place and actions that we’ve taken to mitigate that impact,” CFO Rick Dierker said last week in response to a question on tariffs.

“Just like everybody, we’re well aware of implications there.”

Taiwan steps up to assist relocating businesses

Notably, Taiwan has emerged as a supportive player amid the shifting production landscape.

The nation’s economy minister, Kuo Jyh-huei, announced plans to aid Taiwanese businesses seeking to relocate their manufacturing bases away from China.

“We will as soon as possible come up with help for Taiwan companies to move their production bases,” Kuo said, emphasizing the potential impact of Trump’s tariffs on Taiwanese manufacturers heavily invested in China over the past four decades.

This initiative aligns with broader supply chain strategies that could see Taiwanese firms not only shifting production domestically but also exploring relocation to US soil to mitigate exposure to the new tariffs.

Challenges of moving away from China

Bert Hofman, former World Bank country director for China, provided insight into why companies may find moving out of China arduous.

“Most suppliers to companies such as Madden are based in China, thus it is easy to source there. Moving to another country for production adds complexity in terms of logistics, customs, and settling into a new country for production,” he said in a report by The New York Times.

This inherent complexity may compel companies to choose alternative low-cost manufacturing bases outside of China rather than a full relocation to the US.

Further analysis from RBC Capital Markets analyst Wei-Weng Chen warned about Breville’s plan to accumulate stock.

Chen pointed out that increased inventory could elevate the company’s working capital intensity, potentially impacting stock performance if consumer spending decreases in response to broader economic pressures.

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Brazil’s stock market, represented by the Ibovespa index, faced a challenging week, with the index falling by 1.3% on Friday, dipping below the critical 128,000-point mark.

This decline marks the third consecutive day of losses for the index, and the São Paulo exchange is set to close the week with a flat performance, reflecting growing economic uncertainties in the country.

A combination of rising inflation, a weakening Brazilian real, and concerns over fiscal policy has created an environment of caution among investors, leading to a volatile market outlook.

Inflation data behind the recent downturn

The primary driver behind the recent downturn has been the latest inflation data, which has reinforced the Brazilian Central Bank’s hawkish stance.

October’s annual inflation rate rose to 4.76%, surpassing expectations of 4.72% and up from 4.42% in September.

This unexpected rise in inflation has been fueled by several key factors, including the impact of severe weather conditions, which have caused disruptions in agriculture and contributed to rising food and energy prices.

Additionally, the depreciation of the Brazilian real has compounded the inflationary pressures, making imports more expensive and further driving up domestic costs.

Economic growth, coupled with the expectation of looser fiscal policies, has added fuel to the fire.

The Brazilian Central Bank, reacting proactively to these developments, has raised interest rates twice this year to curb inflation.

However, these measures have yet to fully stabilize the economy, and uncertainty about future fiscal policies continues to weigh heavily on investor sentiment.

On the corporate front, several key sectors in Brazil have felt the strain of this inflationary environment.

Notably, Vale, a major mining company, saw its stock drop by 3% due to falling iron ore prices.

Other companies, including Ambev, JBS, and Suzano, also reported losses, ranging from 1.4% to 2.2%.

These declines reflect broader market pressures, including the lack of a Chinese stimulus to boost consumption, highlighting the interconnected nature of global markets.

The slowdown in China’s economic recovery has dampened demand forecasts for Brazilian commodities, further exacerbating the challenges faced by these companies.

However, not all sectors were hit equally. Petrobras, the state-controlled oil giant, bucked the trend by rising more than 1%.

The company’s strong financial performance, bolstered by high profits and cash flow, has positioned it for potential dividend announcements, which have helped boost investor confidence in its stock.

Brazilian real continues to struggle

Meanwhile, the Brazilian real continues to struggle, having fallen to 5.76 per US dollar, marking a drop from a two-week high.

This depreciation has been driven by a combination of domestic and international factors.

Increased budgetary uncertainty in Brazil, along with rising concerns about US protectionism under President Donald Trump and a sluggish Chinese economic recovery, has weakened the real.

The market is now eagerly awaiting further details on President Lula’s proposed fiscal measures, but the current lack of clarity has led to concerns about Brazil’s economic viability, prompting a more risk-averse stance among investors.

As global market dynamics shift, the demand for the US dollar has surged, putting additional pressure on developing market currencies like the Brazilian real.

The situation has been exacerbated by China’s limited fiscal stimulus, which has reduced demand for Brazilian exports, complicating the country’s economic outlook even further.

Investors are now carefully monitoring the situation, hoping for clearer signals from both the Brazilian government and global economic leaders to guide the next steps in Brazil’s financial recovery.

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US stocks remain resilient following the Federal Reserve’s decision to lower its key interest rate by another 25 basis points on Thursday.

According to the post-meeting statement:

The Committee judges that the risks of achieving its employment and inflation goals are roughly in balance.

Lower interest rates are generally considered positive for the equities market. Here are three stocks that are particularly attractive as the US central bank continues to cut its benchmark overnight borrowing rate:

AbbVie Inc (NYSE: ABBV)

AbbVie is a pharmaceutical behemoth that could benefit from lower interest rates as it requires easy access to cash to reliably fund its product pipeline – and rate cuts typically make it cheaper to borrow money.

The New York-listed firm recently reported better-than-expected financial results for its third quarter and raised its guidance for the full year making it all the more attractive to own for 2025.  

Additionally, the company based out of North Carolina, Chicago is particularly well-positioned for healthy total returns as it currently pays a dividend yield of 3.27%.  

Note that analysts at Cantor Fitzgerald raised their price target on AbbVie stock to $240 last week which indicates potential for about a 20% upside from here.

Chevron Corp (NYSE: CVX)

One of the reasons why the US Federal Reserve chooses to cut interest rates is to stimulate economic growth that tends to accelerate energy demand.

So, investors should consider buying Chevron stock amidst rate cuts as they could help the oil and gas behemoth improve its profitability in the months ahead.

Lower borrowing costs may also make it easier for CVX to fund new projects and unlock the next wave of growth. A rather lucrative dividend yield of 4.15% makes up for another great reason to have Chevron stock in your portfolio.

Shares of the energy company are worth owning also because the pending Hess acquisition that its management expects will close in the back half of next year will likely help increase production and scale operations.

Elf Beauty Inc (NYSE: ELF)

Rate cuts are directly linked with lower cost of capital that typically catalyzes high-growth names like Elf Beauty.

The beauty company has grown its shares as well as market share over the past 22 consecutive quarters.     

Plus, lower interest rates tend to increase consumer spending, particularly on discretionary items like beauty products that ELF primarily deals in.

Elf stock is attractive at current levels also because it reported its financial results for the second quarter this week that came in well above Street estimates.

Unlike other names on this list, however, Elf stock does not pay a dividend at writing and is, therefore, not a suitable pick for income investors.

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China announced a sweeping $1.4 trillion package on Friday aimed at addressing the pressing issue of local government debt, with further economic measures expected next year.

Minister of Finance Lan Fo’an revealed that the government plans to use available deficit space to support these efforts, a strategy he previously described as having significant potential back in October.

According to CNBC’s translation, Lan’s remarks came after a five-day session of the National People’s Congress Standing Committee, where a proposal to raise the debt limit for local governments by an additional 6 trillion yuan was approved.

This five-year initiative will see an annual allocation of approximately 2 trillion yuan through 2026.

Lan also detailed a new issuance of local government special bonds, with 800 billion yuan to be issued each year over the next five years, totaling 4 trillion yuan.

This measure is expected to significantly reduce hidden local government debt, projected to drop from 14.3 trillion yuan at the end of 2023 to 2.3 trillion yuan by 2028.

Lan noted that these efforts will relieve financial pressure on local authorities, freeing up resources to bolster economic growth.

Despite this substantial package, investor response was mixed.

The iShares China Large-Cap ETF (FXI) saw a nearly 5% decline in premarket trading, as many investors had hoped for more direct fiscal stimulus.

“I don’t see anything that exceeds expectations,” Huang Xuefeng, research director at Shanghai Anfang Private Fund Co., in Shanghai was quoted as saying by Reuters. “It’s not huge if you look at the fiscal shortfalls.”

“The money is used to replace hidden debts, which means it doesn’t create new workflows, so the support to growth is not that direct.”

China’s stimulus efforts since late September

China’s leadership has been ramping up stimulus efforts since late September, triggering a stock market rally.

President Xi Jinping called for stronger fiscal and monetary support during a meeting on September 26, aimed at halting the real estate market slump.

The People’s Bank of China has already implemented interest rate cuts, but larger government debt and spending initiatives require parliamentary consent.

Last October, the country increased its deficit limit to 3.8% from 3%, according to state media, although this year’s meeting did not announce a similar adjustment.

Analysts expect fiscal support may ramp up further, especially as the US adjusts its trade policy under President-elect Donald Trump, who has previously threatened increased tariffs on Chinese goods.

China’s ‘hidden’ debt

The local debt burden has been exacerbated by a real estate slump, which has significantly reduced local government revenues.

Additionally, pandemic-related expenditures have further strained budgets.

A report from the International Monetary Fund highlighted that local government debt had reached 22% of GDP by the end of 2019, surpassing revenue growth rates.

Nomura estimates that China’s hidden local government debt could range from 50 trillion to 60 trillion yuan ($7 trillion to $8.4 trillion), with potential debt issuance increases of 10 trillion yuan over the coming years that could save local authorities up to 300 billion yuan annually in interest payments.

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US equity benchmarks rose slightly on Friday as investors assessed the Federal Reserve’s interest rate cut on Thursday. 

The US Fed cut interest rates by 25 basis points on Thursday, and Chair Jerome Powell hinted at further easing of monetary policies in the coming months.

At the time of writing, the Dow Jones Industrial Average surged over 300 points at its session peak, surpassing the 44,000 mark for the first time.

It was recently up by 250 points.

The S&P 500 gained 0.4%, with both indices reaching intraday record highs. Meanwhile, the tech-focused Nasdaq Composite lagged, slipping 0.1%.

All three benchmarks were, however, on course for strong weekly gains, driven by the post-election rally after Donald Trump’s win in the 2024 US presidential election on Wednesday. 

According to a CNBC report, both Dow Jones and S&P 500 were on track for their best week since November 2023. 

“Equities are eager to price in Trump’s domestic growth policies (via small-caps) and hopes for easier regulation relative to the Biden administration,” CNBC quoted Barclays strategist Venu Krishna in a report. 

Whether these moves are sustainable remains to be seen; momentum is extending lofty gains as ‘winners keep winning’, and the sharp post-Election Day moves have pushed major gauges near (or into, in the case of [Russell 2000]) technically overbought territory.

Meanwhile, oil prices slumped more than 2% on Friday as risks to supply subsided. 

Hurricane Rafael was expected to move westwards over the US Gulf of Mexico, alleviating concerns of disruptions in supply from the region. 

Oil prices were also under pressure as a Trump presidency is likely to see more drilling for oil and gas on federal US lands, which could increase production from the world’s largest producer. 

ARK Innovation ETF surges

Cathie Woods’s ARK Innovation ETF surged 11.6% this week, and was on course for its best week since November last year. 

Notable leaders in the fund this week include Coinbase, Palantir and Robinhood, which are believed to benefit from loose regulations under a Trump administration, CNBC reported. 

At the time of writing, the ETF was 0.6% up through Thursday’s close. 

NVIDIA officially joins Dow 

On Friday, chip giant NVIDIA Corporation joined the Dow Jones Industrial Average. 

Last week, it was announced that NVIDIA and Sherwin Williams would officially join the 30-stock equity benchmark. 

Both stocks replace Intel and chemical company Dow Inc. 

However, shares of NVIDIA Corporation were down more than 1% on Friday at the time of writing. The stock has gained over 220% over the last one year. 

Semiconductor, media stocks weigh on Nasdaq

Chip stocks, including NVIDIA, were underperforming on Friday, which weighed on the Nasdaq Composite. 

The VanEck Semiconductor ETF dipped 0.8%, while Arm Holdings fell 3% on Friday. 

Media stocks, including Paramount Global, were down 4% after the company posted weak earnings for the third quarter. 

Rival Warner Bros. Discovery also fell 4% on Friday’s session, while advertising stock The Trade Desk tanked 9%. 

The Trade Desk fell despite posting positive earnings for the  third quarter. 

Tesla hits $1 trillion market cap

Shares of Elon Musk’s Tesla jumped 6% on Friday as the stock continued its post-election rally. 

Friday’s gains took Tesla’s market cap past $1 trillion for the first time. 

The company’s stock rose more than 27% this week after Trump secured his second presidency in the US. Musk’s close ties with Trump were seen as positive for the business. 

Tesla’s CEO Musk was one of the prominent figures backing Trump for his second term as president of the US. 

China announces stimulus package

China on Friday announced a stimulus package of $1.4 trillion to help tackle local government debts. 

The week-long meeting of the National People’s Congress was concluded on Friday as the political body announced measures to boost local government’s growth. 

Meanwhile, the University of Michigan’s consumer sentiment gauge came in at 73 in November in the US. The index rose to its highest level since April. 

The reading was also better than expectations of 71 and was higher from 70.5 clocked in October. 

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