Trump Tariff Threats Resume: How To Profit With Inverse ETFs

After reaching a peak last week, Wall Street tumbles with the resurfacing of President Donald Trump’s tariff threat. This is especially true as Trump announced that he will increase tariffs on Chinese goods worth $200 billion to 25% from 10% this week that were delayed in February on hopes of a deal.

Trump cited that trade talks with China are continuing, but are moving too slowly as Beijing is trying to re-negotiate. Trump is also seeking to target a further $325 billion of Chinese goods with 25% tariffs "shortly." If Trump’s threats are executed, essentially all products imported to the United States from China will face some sort of tariff.

The announcement came as a surprise as U.S.-China trade talks are due to resume this week with Chinese vice premier Liu He expected to travel to Washington on May 8 to end the trade war between the world's two biggest economies. As such, Trump’s move marked a major escalation in trade tensions between the world's two largest economies raising worries over global growth.

The International Monetary Fund, the World Bank, and others have downgraded their global growth forecasts, saying the U.S.-China standoff is reducing world trade and creating uncertainty for companies trying to decide where to buy supplies, build factories and make investments.

The situation has raised the appeal for inverse or leveraged inverse ETFs that could generate big gains in a short span. These products either create an inverse position or leveraged (200% or 300%) inverse position in the underlying index through the use of swaps, options, future contracts, and other financial instruments.

Given this, investors seeking to capitalize on the bearish market sentiments in a short span could consider any of the following inverse ETFs.

Direxion Daily Semiconductor Bear 3x Shares (SOXS - Free Report)

This ETF offers three times (300%) inverse exposure to the PHLX Semiconductor Sector Index, charging investors 95 bps in annual fees. It has amassed about $168.9 million in its asset base while trading in solid volumes of 6.1 million shares a day on average.

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