Trade War Has ETF Volume Soaring in Some Tariff Plays: ETF Watch

(Bloomberg) -- Mounting fears of a global trade war are triggering a spike in activity for some exchange-traded funds that track tariff-sensitive areas like industrial companies and agriculture.

U.S. stocks sank the most in three weeks Tuesday with industrial companies leading the way down after President Donald Trump promised to slap tariffs on another $200 billion of Chinese goods, and China threatened retaliation.

Investors responded by heavily trading the iShares U.S. Industrials ETF, or IYJ, which absorbed $25 million worth of volume as of 2:43 p.m. in New York. That’s more than double its average daily turnover over the past year. The majority of the fund’s exposure is in aerospace and defense, with Boeing Co. its largest holding.

“As investors digest the news, reactions will center on single industries or names,” said Hannah Anderson, global market strategist for JPMorgan Asset Management. “Now that trade tensions are translating into actions, rather than simply attention-grabbing rhetoric, investors should exercise an even greater degree of discretion in making investment decisions.”

Investors also sent volume soaring in a fund that tracks 10 different agricultural futures contracts, including for corn and soybeans. The Invesco DB Agriculture Fund, or DBA, saw $25.5 million worth of trades as of 2:44 p.m., the most since April 4 and almost double the average daily turnover for the past year.

“Despite light turnover for single stocks, we are seeing hedging on trade war headlines in multiple ETFs,” said Dave Lutz, head of ETFs at JonesTrading Institutional Services. “Agriculture seems to be the epicenter, with DBA trading well above its 20-day average volume.”

Agricultural futures sank Tuesday, led by a plunge in soybeans, after China vowed to retaliate “against President Donald Trump’s threatened tariffs.”

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