U.S. President Donald Trump last week abruptly ramped up his trade war with China, announcing a 10% tariff on another $300 billion of imports from the nation. Beijing responded by letting its currency weaken, a move that makes the nation’s goods cheaper for Americans, and by asking state-owned enterprises to suspend purchases of U.S. agricultural products. On Thursday, the People’s Bank of China was seen as trying to stabilize the currency, and U.S. markets broadly rallied.

‘Incremental Cost’

Trump’s latest round of tariffs could hurt the U.S. tech sector, because it includes a broader range of tech products than prior duties, including Apple iPhones and Dell servers, according to a report from S&P Global Ratings. Economists at UBS forecast the levies could reduce U.S. gross domestic product by 0.25 percentage point, and lower China’s as well. Other areas that are exposed include retail and energy and mining, UBS said.

“There’s an incremental cost to every company that gets caught in the cross-hairs,” said Lale Topcuoglu, senior fund manager and head of credit at J O Hambro Capital Management.

Companies exposed to trade wars are already cutting their expectations for future earnings. For example, Rayonier Advanced Materials Inc., which makes paper, lumber, and other wood-based products, said this week it was cutting its full-year forecasts for a measure of results.

The lowest rated bonds, those graded in the CCC tier, have been hit hardest. They’ve gained just 5.1% this year through Wednesday, compared with the overall high-yield market’s 9.4%, and have fallen the most of any junk ratings group since the start of last week.

With risks rising and bond yields broadly falling, performance among different parts of the high-yield market is varying more, said Andrew Feltus, portfolio manager at Amundi Pioneer Asset Management, which managed about $84 billion as of June 30. Picking the right securities is even more important than it usually is.

“We haven’t panicked yet, but we’ve been a lot more sensitive to where valuations are,” Feltus said.

This article was provided by Bloomberg News.

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