Finimize - 🚀 GameStop to the moon... again

What’s going on here?

The US government announced fresh taxes – a.k.a. tariffs – on $18 billion worth of Chinese imports.

What does this mean?

The US brought in tariffs on Chinese products over five years ago, and now it’s kicking them up a notch. Specifically, semiconductor tariffs will double from 25% to 50% by next year, directly impacting the chips that vehicle, aerospace, and defense sectors rely on. The EV industry will be hit particularly hard, with tariffs on electric cars moving from 27.5% to an eye-watering 102.5% this year. On top of that, lithium-ion batteries will see levies rise from 7.5% to 25%, while solar panel tariffs will also double to 50%, potentially reshaping the US renewable energy sector.

Why should I care?

The bigger picture: Write a pros and cons list.

The increased tariffs – which will be phased in over the next two years – are designed to protect jobs and critical industries in the US of A. But that comes with risks: if history’s anything to go by, China will respond with fresh tariffs of its own on US imports. That would likely push down sales for stateside firms that rely on international trade and add another drag on the economy. In fact, Goldman Sachs previously estimated that every percentage point increase in the tariff rate would shrink the US economy by 0.03%.

For you personally: Up, up, and away.

Tariffs typically spark up inflation, because companies pass higher costs onto customers. And while the US insists that these new taxes are targeted enough to avoid widespread damage, any increase in inflation could force the Federal Reserve to delay cutting US interest rates. After all, April’s producer price inflation came in higher than expected on Tuesday, and economists may now expect the same from consumer prices on Wednesday, suggesting there’s little wiggle room in getting inflation down and stable.

What’s going on here?

Shares of GameStop and AMC were on track to almost double early on Tuesday, after the internet fell back into its meme-stock craze on Monday.

What does this mean?

An American investor with the screen name “Roaring Kitty” took to social media with a cryptic post. The same day, shares of electronics retailer GameStop and US movie theater chain AMC jumped 79% and 75% respectively. No, this isn’t an accidental copy and paste from the Wall Street Bets saga of 2021: the same instigator of the famed Reddit rally – which inspired a full-blown film – was at it again earlier this week. AMC cashed in quickly, selling $250 million worth of stock, while retail investor favorites Reddit and Robinhood saw their stocks tick up too.

Why should I care?

Zooming in: Don’t let the tail wag the dog.

Retail investors are often characterized as meme-stock fanatics, with a penchant for following hype over fundamentals. But the data doesn’t back that up: regular Finimize surveys of thousands of retail investors show that only 15% of respondents have ever invested in meme stocks. And these days, they’re approaching online furor with caution. Nearly half of recent survey respondents said they’re using social media “significantly less” than they used to for investment advice, viewing it as one of the least trustworthy sources for financial information.

For markets: We go again.

The meme stock rally of 2021 was born from a coordinated buying spree, which pushed up the share prices of targeted companies and forced those “shorting” the shares – that is, betting their price will fall – to buy more to undo their bets. And because that sent prices even higher, some of those in the know pocketed a tidy profit. So now, investors might be scanning for the next “short-squeeze” candidates, and according to FactSet data compiled by CNBC, SunPower Corporation, Maxeon Solar Technologies, Phathom Pharmaceuticals, and Beyond Meat could fit the bill.