Report: New Ford Focus RS to Make 400 HP, Use Mild Hybrid System

Ford is gearing up to introduce a new generation of the Focus, and that lineup will include a more powerful Focus RS, according to a report from Autocar.

The hot hatch, arriving for 2020, will supposedly produce more than 400 hp. That’s a considerable upgrade from the standard 350 hp, or 370 hp when paired with Mountune upgrades. In addition to the current 2.3-liter turbo-four, the new model should also use a new 48-volt mild hybrid system to reduce emissions and boost power.

The 48-volt integrated starter/generator could contribute 60-70 lb-ft of torque, Autocar says. In total, torque for the new model should come in around 425 lb-ft. The increased output should improve acceleration times. We last tested a Focus RS with 350 hp hitting 60 mph in 4.5 seconds. The RS has traditionally featured a six-speed manual, but it’s possible the new model could offer a dual-clutch transmission to meet demand for automatics in China and the U.S.

When it comes to the standard Focus, we expect the new model will move upmarket. It will also likely grow in size compared to its predecessor, allowing for more passenger and cargo room.

Expect hybrid technology to proliferate throughout the Ford lineup. Ford is cutting its capital expenditures in internal combustion vehicles by one-third, investing that money instead in electrified vehicles. Some of these models will include the F-150 Hybrid, Mustang Hybrid, a battery electric small SUV, and an autonomous vehicle with a hybrid powertrain.

For Now, Stock Market Is Overreacting To China

Trade war? Some say yes, some say no. Odds are rising that one is coming, but for now, investors are willing to forget economic fundamentals and are selling on sentiment. Photographer: Patrick T. Fallon/Bloomberg

The stock market is overreacting to the China tit-for-tat trade spat.  Following a 500 point-plus decline at the opening bell on the NYSE this morning, buyers came in to cut into the lows that are still, of course, low. And soybeans, targeted by China in retaliatory trade measures, are now off their lows as well.

This is all about sentiment today. Momentum is not on the side of the bulls.

There are no tariffs. These are proposed tariffs. Nothing is set in stone at this time, though that does not mean that equity analysts, in particular, will not have to work overtime recalculating profit margins for companies that will be hit by a trade war.

This has been a Goldilocks market for the last few years, pushed forward by quantitative easing at the Fed and policies at the other core central banks’ easy money machine. Over the last 12 months, money managers have been selling out of the U.S. anyway, locking in profits on very expensive equities here, and allocating to emerging markets instead, based on fund flow data from EPFR Global in Cambridge, Mass.

According to Commerce Secretary Wilbur Ross, the proposed tariffs impact products that account for 0.3% of U.S. GDP.

The U.S. economy is still strong, so investors will keep coming back to the fundamentals, giving the market some support.

On Tuesday, U.S. car sales came in better than expected. On Wednesday, ISM Non-Manufacturing came in at 58.8 on the index, meaning the economy is firing on all six cylinders.

HSBC economist Kevin Logan estimates first-quarter growth in overall consumption spending is a lower than expected 1.2%, but a rebound of 3.2% in the second quarter is in the works, he thinks.

“That would help bring the growth rate for GDP up to an expected 3% in the second quarter,” he says, adding that HSBC is forecasting GDP of 2.6%, up from 2.3% last year.

Jobs are still plentiful despite the apparent slowdown in GDP growth in the first quarter.  A strong job market will likely lead to higher consumer spending in the summer months as employment and incomes keep growing.

Inflation isn’t expected to be as volatile. HSBC estimates 1.9%, or thereabouts, for the foreseeable future. Anything under 2.2% gives the Federal Reserve the confidence to hike interest rates just three times instead of four.

Survey data available so far in the first quarter have not shown any negative signs yet, though that will change going forward as big companies like Boeing rethink tariff impacts. The prospects for job growth, for consumer spending, and for small business investment spending still appear to be solid, according to The Conference Board. If these indicators are right, they point to further declines in the unemployment rate in the months ahead and to a pickup in consumer spending as employment and incomes keep growing, HSBC analysts wrote in a report published on Monday.

With a stronger economic outlook comes more investment. Not only from big corporations but also mid-sized private businesses. Greater capital expenditures and pent-up productivity gains from technology investment could lift growth even more over the long term, not just this year and next. Advancement in technology could contain inflation and help contain overheating.

Aalok Devkota Puts Up A Winning Quarter By Playing Exceptional Defense

Aalok Devkota has outperformed 75% of U.S. equity mutual fund managers for the last 3 years in part because we allow him to take defensive action for our clients when he sees fit. He turned defensive about  2 weeks ago, and as a result closed out a winning quarter with a profitable March.

Ken Kam: Congratulations on a great quarter.

Aalok Devkota: I had an outstanding first quarter. My fund returned 6.82% vs. -0.76% for the S&P 500.

Kam: What worked for you?

Devkota: There were few things that worked in my favor. Twitter and Baozun, two of my largest positions, held up very well during the selloff in February. Twitter was actually up in February.

Kam: You made a timely decision to turn defensive a couple of weeks ago by reducing your market exposure to just 60%. How did you know it was time to do that?

Devkota: I follow the credit market to determine what the equity market could do and some of the variables that I track there were showing weakness.

Historically when we see a volatility expansion we see a retest after few weeks to months. So when the market rebounded after the initial selloff I took that opportunity to sell some of the holdings and buy an inverse ETF to hedge part of the positions.

Kam: Can you explain why you bought an inverse ETF?

Devkota: An inverse ETF, is basically like any ETF but moves in the opposite direction to the market. I rarely use inverse ETFs but it has helped me to minimize the volatility. The last time I bought an inverse ETF was in August 2015.

When I look at the current market and compare it to historical market, I see several similarities with 1987, 2007 and 2015.

In October of 1987 we had one of the largest one-day drops. The end of 2007 was the beginning of the great recession and in 2015 we saw the market drop but it rebounded quickly.

I do not know if the current market will be like one of these past scenarios, but I was watching it carefully because I was worried.

Kam: Do you think we are in a bear market?

Devkota: It is too early to tell if the first quarter was a much needed correction or the beginning of a new bear market. Regardless, I would rather be safe than sorry so I raised cash and reduced my market exposure with the inverse ETF.

Kam: Today you sold your inverse ETF. Does that mean you believe the risk of a bear market has dropped?

Sears Holding, Delta Air hit by customer data breach at tech firm

a large air plane on a runway at an airport: A Delta Air Lines flight is pushed put of its gate at the airport in Salt Lake City

Department store chain Sears Holding Corp (SHLD.O) and Delta Air Lines Inc (DAL.N) said on Wednesday some of their customer payment information may have been exposed in a cyber security breach at software service provider [ 24]7.ai.

Sears said it was notified of the incident in mid-March and the incident led to unauthorized access to the credit card information of under 100,000 of its customers.

Technology firm [ 24]7.ai, which provides online support services for Delta, Sears and Kmart among other companies, found that a cyber security incident affected online customer payment information of its clients, it said

The incident happened on or after Sept. 26, 2017 last year and was found and resolved on Oct. 12, the company said.

Personal details related to passport, government identification, security and SkyMiles information were not impacted, Delta said.

The No.2 U.S. carrier said while a small subset of its customers would have had their information exposed, it cannot be said with certainty if their information was accessed and compromised.

Sears said its stores were not compromised and their internal systems were not accessed in the breach. There was no impact on the information of customers using a Sears-branded credit card, the retailer said.

Trump thinks he has nothing to lose in a trade war with China. He’s wrong.

a group of people: Chinese workers walk past imported soybeans at a port in Nantong. If Trump starts a trade war with China, US soybean exports to China could plunge.

China and the US are threatening to impose massive tariffs on each other in an escalating game of chicken — and it could end up hurting President Trump and the GOP at the ballot box.

On Tuesday, the Trump administration announced a list of more than 1,300 Chinese exports — including toys, electronics, shoes, clothing, and furniture — that it plans to hit with 25 percent tariffs, or border taxes. The tariffs are intended to punish Beijing for restricting US investment in China and stealing American intellectual property. Combined, they would affect about $50 billion worth of Chinese exports.

The very next day, China struck back, unveiling its own list of US exports that it plans to hit with 25 percent tariffs. The proposed package could affect more than 100 American-made products, including cars, airplanes, and soybeans — the top US agricultural export to China. Combined, they would cover about $50 billion worth of US exports, perfectly mirroring the US tariffs.

“If someone wants a trade war, we will fight to the end,” Wang Shouwen, China’s commerce vice minister, said at a press conference Wednesday announcing the move.

China has not announced a date for implementing its tariffs because it says its move will depend on whether Trump actually pulls the trigger on his proposals. The White House is allowing US industries to weigh in on the proposed tariffs before making a final decision, and the list may ultimately change.

But even the prospect of a tit-for-tat trade war between the world’s two largest economies caused stocks on Wall Street to plunge Wednesday morning.

Trump defended the move on Twitter on Wednesday and pushed back against the idea that the US was on the brink of a trade war.

“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US,” Trump wrote. “Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”

“When you’re already $500 Billion DOWN, you can’t lose!” he added.

But Trump certainly does have something to lose. China is deliberately targeting US industries like auto manufacturing that Trump has made a key focal point of his economic policy as president. And the health of those industries is of particular political importance as the midterm elections approach.

Beijing is also looking to hammer US agricultural exports produced in states that Trump and the GOP consider vital strongholds. If China imposed its proposed tariffs, it would cause demand for those US exports to slump in China, and that in turn could dent profits and cause layoffs in those industries.

“While Trump has a lot of support for getting tough with China on trade, if his actions start hurting farmers and manufacturing workers, that support may prove to be very thin,” Edward Alden, a trade expert at the Council on Foreign Relations, told me.

Trump’s trade attacks on China could hurt him politically

The tariffs that the US and China have proposed aren’t final yet.

The US tariffs are currently in a “notice and comment” stage, during which domestic industries will have the opportunity to express their opinions on the proposed policy. The administration intends to hold a public hearing on May 15, and companies can file official objections to the policy until May 22.

White House press secretary Sarah Huckabee Sanders said on Wednesday that if China doesn’t offer concessions to the US, the proposed tariffs will lock into place. “I would anticipate that if there are no changes to the behavior of China … then we would move forward” with tariffs, she told reporters.

Analysts say Trump could end up walking back the scale of the tariffs considerably, especially if major companies like Walmart, which sells many of the Chinese products that would be affected by the tariffs, push back hard.

But Trump is more likely to be swayed by China’s quick and fierce response to his proposals.

China’s threat to put tariffs on soybeans is something the administration will take particularly seriously, analysts say. China dwarfs every other country in the world in its demand for soybeans and buys about a third of the US’s soybean crops. If Beijing imposes 25 percent tariffs on US soybean imports, it would deal a devastating blow to the industry.

As Bloomberg News’s Joshua Green notes, the biggest soybean producers in the US include Ohio, Iowa, Missouri, and Indiana — states in the heart of Trump country where neither the president nor his party wants to see economic instability during the 2018 or 2020 elections.

“The fact that Beijing put soybeans on its list is a signal that China is not going to pull any punches,” Christine McDaniel, who served as senior trade economist in the George W. Bush administration, told me.

Many of China’s other tariff choices are clearly politically motivated as well, like orange juice, much of which comes from the battleground state of Florida. Chinese tariffs on corn crops could hit swing states in the Midwest like Illinois.

Analysts say Beijing knows that targeting these industries is a good way to get Trump’s attention, since much of Trump’s trade policy, like renegotiating NAFTA, has been built around finding ways to increase jobs for domestic manufacturing. States in the Rust Belt like Michigan and Ohio are key states for auto production, and they’re also key states for Trump’s base.

Employment isn’t the only thing that would be affected. US tariffs on Chinese goods may make items such as, say, Chinese-made shoes more pricey. That, in turn, would mean US consumers could start buying fewer goods, slowing down the pace of the economy.

Trump may end up staying the course and going through with every tariff he proposed. Or he could try to negotiate a deal with China in which both countries impose less severe — and less politically sensitive — tariffs on each other.

Merck shares rise after Barclays upgrades shares, downgrades competitor Pfizer

A research lab at Merck

Barclays upgraded Merck to overweight from equal weight on better opportunities versus its competition, while downgrading Pfizer to equal weight from overweight given the less likely chance of a “transformative” acquisition.

Analyst Geoff Meacham and his team also raised their price target on Merck by $2 to $64, a more than 17 percent increase from Wednesday’s close.

“In our view, there is perhaps 15 to 20 percent of first-line lung market share ‘up for grabs’ in the U.S.,” Barclays analyst Geoff Meacham and his team said in a Thursday report. Meacham also noted a better outlook versus key competitors, namely Bristol-Myers Squibb.

Merck shares rose 1 percent in premarket trading Thursday above $55 a share. The stock has fallen 3 percent so far this year.

Meacham and his team lowered their price target on Pfizer by $3 to $38, still more than 5 percent above Wednesday’s close.

“In our view, current levels largely capture the upside for key products such as Prevnar, Ibrance, Xeljanz and Xtandi,” the report said. “Our previous Overweight rating was based on the potential for a transformative acquisition, which could accelerate the growth profile and provide a clearer strategic direction, which we now view as less likely in the near term” based on recent interaction with management, including the CFO.

Pfizer shares were mildly lower in premarket trading Thursday. The stock is down 0.25 percent for the year so far.

Gundlach betting against stocks becaGundlach betting against stocks because of bond yields and bitcoinuse of bond yields and bitcoin

The era of low volatility is over and it’s stock market investors who will have to pay, “bond king” Jeffrey Gundlach said Wednesday.

Rising bond yields and the plunge in cryptocurrencies like bitcoin are providing signs that have led Gundlach to expect stocks to end the year in negative territory.

The DoubleLine Capital founder conceded that his bet against the market suffered in December and January, “but it was so obvious to me that bitcoin is the dot-com of our world today, and this mania is so similar to where we were in 1999.”

In addition to betting against stocks generally, Gundlach has been long equities in his flagship fund as he expects the return of volatility to change the investing landscape.

Jeffrey Gundlach

“We’re in a volatility regime that is completely, obviously different from what we experienced in 2017. It’s payback time,” Gundlach told CNBC’s “Halftime Report” in an interview. “2017 was the easiest investment year of all time. The risk-adjusted returns for the stock market were probably the best in history.”

Rising government bond yields have put pressure on stock prices, he said. Specifically, a 2.63 percent yield on the benchmark 10-year Treasury note marks a line in the sand for stocks, which are currently in correction territory.

“The stock market can’t take higher bond yields,” he said.

Gundlach spoke on a day when stocks tumbled at the open but regained most of their losses through the course of the day. The S&P 500 and Nasdaq briefly turned positive in afternoon trading, while the Dow industrials remained negative.

Volatility has indeed surged in 2018 after lingering around historic lows in the previous year.

One sign Gundlach pointed to is bitcoin — the cryptocurrency had peaked in 2017 along with stock prices, while its slumps this year have preceded downturns in stocks.

Top Stocks To Short On The Market’s Volatility

ST. LOUIS – NOVEMBER 15: Stifel Financial’s ‘Forces’ statue of a battling bull and bear sits outside the office building in St. Louis, Missouri on November 15, 2015. (Photo By Raymond Boyd/Getty Images)

Based on the market’s recent volatility, we thought it would be timely to come forward with some of CressCap’s top sell recommendations. The CressCap five factor model analysis ranks the following three stocks as some of the top shorts in U.S. listed equities. The foundation of our recommendations is to identify companies that perform best and worst on the collective basis of value, growth, EPS revisions, profitability, and LT momentum. Every day, the CressCap systematic trading model gathers data for 6,500 companies globally, then analyzes and assigns academic grades (A – F) for each financial metric. These grades are scored relative to each region/sector. The stocks in the table below have been selected based on their low rank in the sector and poor financial metrics. In addition, our low grades for these companies’ EPS revisions, growth rates and long-term price momentum characteristics make these three stocks top shorts in the CressCap universe. CressCap Investment Research

Chicago Bridge Is Falling Down

Chicago Bridge and Iron Co.  (CBI-US)

Overall Grade: F

CBI provides design, engineering, and construction services for energy infrastructure projects including bridges. CressCap currently ranks the company as one of the top shorts. CBI uses technology and professional expertise to deliver to customers state-of-the-art designs and construction services.

CressCap notably grades CBI’s estimated EPS Growth a D- as it posted a decline of 176.98% vs. a sector growth avg. of 43.24%. Additionally the company received a CressCap grade of F for its 2yr historic sales growth rate. The company posted a -48.39% growth rate vs. the sector avg. 7.8%. Another factor to the company’s lagging stock performance is its operating margin. CressCap grades CBI’s operating margin F as it reported the margin at -3.09% vs. the sector’s avg. operating margin of 15.13%. To add to the fundamental turmoil the company’s estimated cash flow growth is graded a D- at -61.13%. CressCap’s overall grade for CBI, F, reveals the company as a potential short in a market that’s volatility is awfully high. Furthermore the company’s ROI and ROE are both graded F as ROE is -182.19% (vs. sector avg. 11.71&) and ROI is -97.57% (vs. sector avg. 6.34%). All these metrics are glaring red flags that should sway investors away from owning the stock.

Revenues have fallen sharply for each of the last 3 years. FY2015 was down 18.1%, FY2016 was -19.1% and FY2017 was -22.4%. Operating profits fell commensurately from $995m to ($294.1m) over the same period. OCF was mixed with FY2015 at ($56.2m), FY2016 at $654.5m and FY2017 at ($909.4m), reflecting the company’s uneven performance history. CBI’s debt is $2.6b and cash was $355m as of FY2017. The trailing dividend yield was 0.97% (the dividend was suspended as of 2Q17 results released on 8/10).

The stock may find support at the prior low of $9.66 but RSI is confirming lower lows into support. We would watch for buy-side volume into support as a tell that the stock might try to bounce off $10, give or take.

Top Stocks Under $10

A woman is seen using the Empower app on 10 May, 2017. Founder Warren Hogarth developed the app to help millenials manage their finances and eventually to replace all banking apps offering cross paltform functionality. The app has secured financing by the prominent fintech investment firm Sequoia Captial based in Silicon Valley. (Photo by Jaap Arriens/NurPhoto via Getty Images)

Investing has to start somewhere, and starting small can be a great way to get acquainted with the market. The trick is to identify stocks with low prices that also possess very strong fundamentals. We are re-introducing an old concept of buying stocks below a $10 stock price. Typically, it is hard to find companies possessing the collective financial traits we seek, such as the attractive characteristics of value, growth, strong EPS revisions, profitability and strong momentum. Fortunately, the power of filtering big data along with our systematic trading model has helped CressCap to identify six stocks under $10 that possess the above core fundamental metrics which we desire. CressCap Investment Research

Expand to see how our directional recommendations are computed: CressCap uses a multi-factor model to select the best-performing stocks. Our data is updated daily and the academic grades (A – F) for each financial metric are scored and ranked on a regional/sector relative basis. The foundation of our recommendations is to identify companies that possess the collective investment style of Value, Growth, EPS Revisions, Profitability and LT Momentum. Academic grades of C or better indicate that each metric scores well compared to the peer sector.

Arrowhead Pharmaceuticals

Arrowhead Pharmaceutical is a company that specializes in treatments for gene-based diseases and is at the forefront of developing and testing new experimental treatments. Their medicines treat intractable diseases by silencing the genes that cause them.The company is ranked 56 of the 1,905 in our overall universe and is ranked 7 of the 355 stocks in the sector. The stock is recommended as a buy based on our quant model and is also supported by technical indicators and fundamental analysis. Long and short-term momentum are A+ and A grades, respectively. Growth grades are also very solid, with 2 Yr. historic sales graded an A+ and 2 Yr. forward sales grades an A-. This year also held a market cap change of 334.78% relative to a sector change of 31.41%.

Glu Mobile Inc.

Our next buy recommendation with a price under $10 is Glu Mobile. Glu is a leading creator of mobile games. Founded in 2001, Glu is headquartered in San Francisco and it produces games like MLB for every new season. The company had a very exciting and rewarding 2017. Recently, Glu reported Fourth Quarter and Full Year 2017 Financial Results. According to the company’s press release, fourth quarter revenue was up 73% year over year to $80.2 million; full-year 2017 revenue up 43% to $286.8 million. Fourth quarter bookings grew 44% year over year to $83.2 million; full-year 2017 bookings reached a record $320.4 million, up 50% year over year. The stock has a long-term price momentum that is graded an A- in our system, a grade reflected in the EPS revisions that have been moving up for FY1 and even more for FY2. The company’s debt to equity is 0%, outstanding against a sector ratio of 34.5%.

R1 RCM Inc.

R1 is a leading provider of revenue cycle services and physician advisory services to healthcare providers. The stock is not just a low price but a great value. In the CressCap universe, the stock ranks 179 of 1,905 and it holds a sector rank 36 of 355. The company’s value is exhibited in its price to sales ratio of 1.62 relative to a sector ratio of 6.63, earning a grade of A- according to CressCap criterion and for enterprise value / EBITDA FY1 it holds a B- grade. CF/ROI suggests the stock is somewhat undervalued with a B+ rating. For the 4th quarter, the company reported GAAP net services revenue of $140.3 million, up $17.1 million sequentially. Additionally, the company’s momentum is outstanding in the Healthcare sector, achieving all A grades in the short to long-term. R1 RCM also had a market cap change of 142.65%, graded an A- relative to a sector change of 31.41%. This indicates there is very strong underlying demand for the shares.

Gannett Company

Gannett is a global media holdings company that owns brands including USA Today, as well as, 100 local media publications and digital marketing services companies across the U.S. and Europe. The company has a reach of 43% of internet users across all of its outlets. The stock is a great value based on CressCap’s fundamental analysis, with EV/EBITDA of 3.90 relative to a sector ratio of 11.12 and a CressCap P/E and P/S grade of A. The stock price has been drifting down while 2019 annual EPS revisions from analysts have been moving up to $1.02 from $0.89 90 days ago. The company continues to make strong progress moving from print media to digital. According to the 2017 4th quarter results release, for the full-year 2017, digital revenues grew to $1 billion and now comprise 31.6% of total revenues. Additionally, net cash flow from operating activities was approximately $72.8 million compared to $47.6 million in the quarter of the prior year.

Oasis Petroleum Inc.

Oasis is an acquisition and development company that focuses on oil and natural gas resources. The stock exhibits some exciting metrics that indicate the price could move higher and break-out in coming months. In our opinion, the stock is attractive as there has been an increase in the EPS revisions grade and the value grade is still very attractive. The stock has a CressCap grade of A+ for 1-month analyst revisions and an A for 6-month revisions. Analysts EPS revisions for FY1 and FY2, exhibit a B+ grade compared to the sector. The 2 Yr. Forward EPS growth rate grade is now a C+ compared to the 2 Yr. historic EPS growth rate of F. Notably, in the last 90 days, analysts have revised annual 2017 estimates up to $0.51 from $0.32. The stock also looks attractive on a number of value metrics. The price to book ratio for FY1 is 0.62x versus 1.62x for the sector so it is logical it possesses a CressCap grade of A+ on Price to book. The price/cash ratio grade is an A- and FY1 EV/EBITDA grade is B+. Total revenue for 2017 increased 77% to $1,248,424 from $704,665 in 2016.

SRC Energy

Our final recommendation is another oil and natural gas acquisition and exploitation company, SRC Energy. The overall CressCap grade is B. We like some of the growth aspects of the company’s financial metrics. The 2 Yr. forward EPS growth rate grade is now an A- compared to   2 Yr. historic EPS growth rate grade of D. The 2 Yr. forward sales growth rate grade is an A. Analysts have a lot of conviction on the company’s growth prospects going forward. The stock also has great profitability metrics, with operating margins and gross profit margins both graded an A+ by CressCap and a return on assets graded an A. While most valuation metrics are in line with the sector, it does look inexpensive on a P/E basis at 8.6x versus 16x for the sector. Results were announced at the end of February and the company stated revenues for the three months ending December 31, 2017, increased 262% as compared to the three months ending December 31, 2016.  SRC attributed this to a 244% increase in sales volumes, period over period. For the twelve months ending December 31, 2017, SRC’s revenues increased 238%.

Mexican TVs, Pork Set to Benefit From U.S.-China Trade War

An employee pushes a trolley with a Vizio Inc. high-definition television (HDTV) at a Target Corp. store on Black Friday in Dallas, Texas, on Friday, Nov. 24, 2017. The National Retail Federation projects that about 164 million consumers -- 69 percent of Americans -- will shop at stores or online over the long weekend that starts on Thanksgiving.:  

The surprise winners of a trade spat between the U.S. and China might turn out to be Mexican producers of pork and flat-screen televisions.

Mexico, it turns out, is the largest exporter of flat-screen TVs to the U.S., which is among the thousands of Chinese products targeted by President Donald Trump’s proposed tariffs. At the same time, Mexican farmers may be able to jump in as consumers in China — the world’s largest market for pork — face the prospect of pricier U.S. meat.

Mexico’s potential fortune illustrates the far-reaching — and unintended — consequences stemming from the budding trade war between the world’s two largest economies. Trump has railed against U.S. trade deficits with both nations, but Mexico still has the advantage of favored status under Nafta — at least for now.

U.S. consumers bought $6.5 billion worth of screens from its southern neighbor last year, ahead of China’s $3.9 billion. If the tariffs are enacted, Mexico’s share of the market could grow quickly while China’s shrinks, Bloomberg Intelligence analyst Caitlin Webber said.

“Mexican factories are already benefiting from Nafta and saving a 3.9 percent tariff on their U.S. sales,” Webber said. “They could see a further competitive boost if their Chinese competitors are potentially going to be 25 percent more expensive.”

One company in particular, Vizio Inc., could get a lift. The high-definition TV manufacturer, based in Irvine, California, moved its manufacturing hub to Tijuana, Mexico, from Taiwan in 2015. Vizio sells most of its TVs in retailers like Walmart, Sam’s Club and Costco.

Trump’s China Trade Focus Brings Mexico Stock Investors Respite

On the other side of the spat is pork. China is among the largest foreign buyers of U.S. pork and is a key destination for cuts including feet and ears that aren’t in big demand elsewhere. China has already issued a 25 percent tariff on U.S. pork imports that took effect Monday.

Mexico may benefit from this — if the governments can reach an agreement. China currently receives some cuts of Mexican pork, but not products such as entrails.

‘Great Opportunity’

“There’s a great opportunity in the Chinese market for Mexico,” Alejandro Ramirez, head of Mexico’s association of pork producers, said in a phone interview. “We’re asking our government to help us open up more export plants and to negotiate a permit so we can export entrails too.”

The permit would have to be negotiated between the nations’ governments, Ramirez said. Out of Mexico’s pork exports, only about 1.1 percent goes to China, he said, but there’s huge growth potential, especially if U.S. supplies become more expensive.

To be sure, the U.S. and China have indicated they’re willing to negotiate, so there’s a chance the promised tariffs never materialize. But Mexican producers should still prepare, Ramirez said.

“If we’re given the opportunity, there’s a big space in that market we can cover,” Ramirez said.