Ian Cowie: Trump tariffs to harm this trio, but I’m selling only one
Three of our columnist’s holdings are expected to feel the heat from Donald Trump’s tariffs plans, which has led to the sale of one investment trust in his ‘forever fund’.
28th November 2024 10:27
by Ian Cowie from interactive investor
Two of my investment trusts hit a bump when American president-elect Donald Trump said he would impose 25% tariffs, or taxes on imports, from those countries.
But neither of those are the investment trust I have sold as I aim to protect my modest portfolio from a trade war that looks set to create financial casualties on 20 January, when Trump takes control of the biggest economy on this planet.
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BlackRock Latin American Ord (LSE:BRLA) and Canadian General Investments Ord (TSE:CGI) are in the firing line of those punitive 25% tariffs. But I intend to continue investing in both because there will be corporate winners, as well as losers, from this trade war.
In an early indication of how unpredictable the years ahead might be, the president-elect said he intends to impose 10% tariffs on China. That’s a long way short of the 60% tax hike Trump was talking about just a few weeks ago.
Perhaps his new bestie, the billionaire Elon Musk, has had a word in the old boy’s ear about those Tesla Inc (NASDAQ:TSLA) factories in China. Either way, international investors had better get ready to live with something of a loose cannon in the White House.
Claudia Sheinbaum, the president of Mexico, has already retaliated verbally, with threats to impose tariffs on American imports. Coming down from the clouds of geopolitics, this small shareholder in BRLA notes that Mexico is its second-biggest holding, representing 30% of assets, after Brazil, where 61% of this £115 million fund’s money is invested.
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The miner, Vale SA ADR (NYSE:VALE), and the oil giant, Petroleo Brasileiro SA Petrobras ADR (NYSE:PBR) are BRLA’s two biggest holdings but “total returns” to shareholders have been negative or tiny for a long time. Independent statisticians at Morningstar reckon BRLA has shrunk our money by -19% over the past year; -7.3% over five years and delivered 15% over the decade.
If BRLA was not yielding 7.5% dividend income, that has increased by an annual average of 4.8% over the past five years, it would probably trade at a much bigger discount to its net asset value (NAV) than the -15% seen today. Even so, having been a shareholder for more than a decade, I have no intention of bailing out now.
Fortunately, CGI has survived even bigger threats than Trump, having been founded in 1930, just as the Great Depression began, with the Second World War soon after. While the past is not necessarily a guide to the future, historical facts can provide some comfort to shareholders in this Canadian $1.6 billion (£900 billion) fund today.
Looking forward, its diversified portfolio should diminish risk, with the microchip-maker NVIDIA Corp (NASDAQ:NVDA) representing nearly 9% of the total, and the railway Canadian Pacific Kansas City Ltd (TSE:CP) not far behind, just ahead of the iPhone-maker Apple Inc (NASDAQ:AAPL), and the self-descriptive West Fraser Timber Co.Ltd (TSE:WFG).
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It all added up to sustained positive returns of 23% over the past year; 96% over five years and 181% over the decade, with gross dividend income of 2.4% rising by 4.6% per annum. Still overshadowed by bigger rivals south of the border, CGI trades at a tempting -43% discount to NAV.
Further from home and less reassuringly, although Trump did not mention Vietnam in his presidential campaign, he did call this country “almost the single worst abuser of everybody” in 2019, when he added: “Vietnam takes advantage of us even worse than China”.
Unlike China and Musk, Vietnam has no powerful friends in the White House and I fear it will not be long before the smaller country that humiliated America’s military might 49 years ago finds itself on the receiving end of financial retribution.
So, I have sold all my shares in VinaCapital Vietnam Opportunity Fund Ord (LSE:VOF) at £4.34. I originally invested in Vietnam Enterprise Investments at £4.04 in July 2018, before bailing out of VEIL at £5.42 in October, 2022, to buy VOF at £4.26.
Not every story has a happy ending and, in the words of the Chinese curse, I fear we might be about to “live through interesting times”.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
Ian Cowie is a shareholder in Apple (AAPL), BlackRock Latin American (BRLA) and Canadian General Investments (CGI), as part of a globally diversified portfolio of investment trusts and other shares.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
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