Early this morning, it was announced that the US and China had reached a trade deal. This comes after several months of tension between the two nations.
The Australian Financial Review reported that a trade framework between the two countries had been completed.
Under the agreement, Beijing has agreed to remove export restrictions on rare earths and magnets. Meanwhile, the US has agreed to allow Chinese students back into its colleges and universities.
Both countries will maintain tariffs at their current levels.
Commenting on the deal, US President Trump posted on his social media:
Our deal with China is done, subject to final approval with President Xi and me..We are getting a total of 55 per cent tariffs, China is getting 10 per cent. Relationship is excellent!
Following this news, investors may be wondering whether to load up on US stocks.
There's no doubt that this agreement between the US and China has boosted market sentiment. However, with several trade deals yet to play out, the final and lasting tariff impact on individual US companies remains to be seen.
Last week, activewear retailer Lululemon Athletica (NASDAQ: LULU) fell 23% after its quarterly earnings report showed that tariffs had impacted revenue growth and profit margins. Meanwhile, President Trump suggested he might place a 25% tariff on Apple Inc (NASDAQ: AAPL) for manufacturing iPhones outside the United States.
Given this degree of uncertainty, diversification across different industries and companies is particularly valuable. Investing in US-focused ASX exchange-traded funds (ETFs) may be especially beneficial for ASX investors in the current environment.
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Vanguard US Total Market Shares Index AUD ETF (ASX: VTS)
With around 4,000 holdings across the total listed US market, Vanguard US Total Market Shares Index AUD ETF is extremely diversified. For a management expense of just 0.03%, it provides exposure to the largest companies in the world, as well as those at the smaller end of the market.
VTS took a hit earlier this year after 'Liberation Day', falling 17% between 14 February and 7 April. However, it has since bounced back strongly, rising 14% since 7 April.
Over the longer term, its track record is among the best ASX ETFs on the market. Its share price has increased by more than 100% over the past 5 years.
Which other US-focused ASX ETFs should I consider?
Those looking for more concentrated exposure to the largest US companies should consider the iShares S&P 500 AUD ETF (ASX: IVV). With a management expense of 0.04%, this ASX ETF tracks the S&P 500 Index (SP: .INX). It is also up by more than 100% over the past five years.
Alternatively, for very concentrated exposure, investors should look into the Global X Fang+ ETF (ASX: FANG). This ASX ETF contains just 10 equally weighted companies. While past performance does not guarantee future performance, the FANG ETF has performed the best out of the three ETFs discussed, rising a staggering 187% over the past five years.
