China and U.S. strike phase one deal to avoid new tariffs

Catch up on the top industries and stocks that were impacted, or were predicted to be impacted, by the comments, actions and policies of President Donald Trump and his administration with this weekly recap compiled by The Fly:

1. CHINA TRADE DEAL: Following conflicting reports about the state of trade negotiations on Friday, President Trump tweeted that the U.S. has agreed to "a very large Phase One Deal with China." His tweets went on to say that the "penalty tariffs" set for December 15 will not be charged and negotiations on the "Phase Two Deal" will begin immediately, "rather than waiting until after the 2020 Election."

United States Trade Representative Robert Lighthizer called the trade deal "historic and enforceable" in his own announcement on the agreement. The deal requires structural reforms and other changes to China's economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange and also includes a commitment by China that it will make "substantial additional purchases" of U.S. goods and services in the coming years. In exchange, the United States has agreed to modify its Section 301 tariff actions "in a significant way," explained Lighthizer. The U.S. will be maintaining 25% tariffs on approximately $250B of Chinese imports, along with 7.5% tariffs on approximately $120B of Chinese imports.

2. TOY COMPANY 'REPRIEVE': Jefferies analyst Stephanie Wissink called reports of a trade agreement in principle with China that will remove and/or delay tariffs on toys a "holiday gift" and "reprieve" for toy companies including Hasbro (HAS), Mattel (MAT), Funko (FNKO), Build-A-Bear (BBW) and Jakks Pacific (JAKK). While the second half of 2019 order flow damage is done and she expects some of the operational response to tariffs to remain, this news means the estimated 200-250 basis point drag to margins from the tariff cost burden may be avoided, Wissink tells investors. In terms of the holiday season, Wissink said her season to-date checks continue to reinforce her category expectation for low-single digit growth and she is are relying on "a final weekend thrust" to push holiday season toy sales into the low-to-mid single digit range. She has Buy ratings on Hasbro, Funko and Build-A-Bear and Hold ratings on Mattel and Jakks.  

3. BUILDING PRODUCT WINNERS: Jefferies analyst Philip Ng said among building products companies he sees Masco (MAS) and Fortune Brands (FBHS) as the biggest beneficiaries of a new trade deal with China. A roll back of 50% of the existing tariffs could boost Masco's EPS by 6% and add 3% to earnings for Fortune, estimates Ng. He also believes demand should lift as well, estimating that every 1% rise in volumes translates to a 1% increase in EPS for these two companies. Ng kept Buy ratings on both stocks. 

4. USMCA: On December 10, U.S. House Speaker Nancy Pelosi said that the United States Mexico Canada trade pact that was struck between House Democrats and the White House improved upon President Trump's initial agreement with new provisions targeting the environment and other areas, Reuters reported. Pelosi said at an event hosted by Politico that the new deal also improves areas targeting workers' rights, pharmaceuticals, and enforcement provisions, the report says.  

5. IMPEACHMENT PROCEEDINGS: The House will vote on two articles of impeachment this week, possibly on Wednesday. If either count is approved, the matter would then move to the Senate.