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2 Stocks to Watch as the U.S.-China Trade War Worsens

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There is more trouble on the horizon as the United States and China, the world’s two largest economies, duke it out in a heated trade war. In March, it seemed like a deal may be imminent, but the two sides have been unable to reach a breakthrough. The Trump administration announced that its 10% tariff on $200 billion worth of Chinese goods would increase to 25%. China promptly retaliated with 10% tariffs on $60 billion of U.S. imports.

On Monday, Google announced that it would block Huawei phones from accessing critical parts of the Android operating system. This will hinder Huawei’s presence outside China. U.S. hardware manufacturers like Qualcomm, Broadcom, and Intel have announced that they will no longer sell the company components. This came after the U.S. Department of Commerce added Huawei to its Restricted Entity list.

Canada has already been injected into the trade war with its arrest of Huawei executive Meng Wanzhou. China has responded with the arrests of two Canadian citizens for espionage. Chinese media outlets have also threatened boycotts of major Canadian imports.

Today, we are going to look at two stocks that could be negatively impacted as this trade war drags on.

Canada Goose (TSX:GOOS)(NYSE:GOOS)

Canada Goose designs, manufactures, distributes, and retails premium outerwear. The Canada Goose brand has built huge momentum in the latter half of this decade, bolstered by celebrities who have sported the product. The company has made impressive strides after its public listing, and it has planned significant international expansion.

Expansion in China is a priority for Canada Goose. The company opened a new store in downtown Beijing in late December 2018. It was a great success, especially considering the political cloud over the opening. Some Chinese media outlets had launched a social media campaign to boycott Canada Goose. However, it looks like the popular brand has won out in the near term.

Canada Goose stock has climbed 8.9% in 2019 so far. It is expected to release its fiscal 2020 first-quarter results in August. The company has passed over a concerning hurdle, but shareholders should hope for tensions to cool between Canada and China going forward.

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Jamieson Wellness (TSX:JWEL)

Jamieson Wellness is a Toronto-based company that is engaged in manufacturing, distributing, and marketing branded natural health products. Shares have dropped 6.2% in 2019 as of early afternoon trading on May 21. The stock is down 12.2% from the prior year.

Jamieson has a solid domestic footprint, but most of its growth has come from its international expansion. In 2018, Jamieson received Orange Hat registration certification from China’s Food and Drug Administration. It is establishing infrastructure and staff within China. Jamieson projects that it will have up to 20 Orange Hat registrations by the end of this year. This makes China a crucial point of interest for the company going forward.

In the first quarter of 2019, international sales posted nearly 30% growth, led by momentum in China and Eastern Europe. Overall adjusted EBITDA rose 14.1% to $14.5 million. The nutrition and supplements industry is well positioned for big growth in the coming years. Jamieson’s interests in China appear to be secure, but the situation is worth monitoring.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. Tom Gardner owns shares of Qualcomm. The Motley Fool owns shares of Qualcomm.

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