Donald Trump threatens to put a $200 billion bomb under share markets

Traders will be glued to the unconventional Twitter feed of Donald Trump this afternoon due to threats the U.S. President is making to impose tariffs on an additional US$200 billion of Chinese imports into the U.S.

Midnight tonight U.S. time (2pm AEST) was a reported deadline for an announcement (or tweet) over the imposition of the tariffs, but as Australian traders pack up for the weekend there appears no news from Washington.

Trade wars and tariffs are generally bad for stock prices as if trade shrinks so does gross domestic product and rates of global growth.

As a result of the tensions the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) looks poised to extend a week-long losing streak as buyers disappear ahead of what could be another weekend of news headlines around a trade war with any number of major economies including Canada, China, Japan and Germany.

Another consequence of the trade fights is the falling Australian dollar that will help the bottom lines of companies earning revenues and profits overseas before reporting earnings in Aussie dollars.

A couple of offshore earning large caps available available at much cheaper prices than this time last week include Macquarie Group Ltd (ASX: MQG), Cochlear Ltd (ASX: COH) and Amcor Limited (ASX: AMC).

The primary headwind facing the Aussie dollar are traders’ expectations that the Reserve Bank is not likely to lift rates until well into 2019 at the earliest. As such it’s possible the dollar continues to slide lower over the 12 – 18 months ahead. Companies earning money offshore then could continue to receive share price support in this macro environment.

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Motley Fool contributor Tom Richardson owns shares of Cochlear Ltd. and Macquarie Group Limited. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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