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Markets took a late-day gut punch on Oct. 14 after President Donald Trump took to Truth Social and threatened to terminate business with China“having to do with cooking oil” among other“elements of trade” in response to China slashing imports of U.S. soybeans in recent months. (1)

The social media post sent ripples across the stock market. Market watcher The Kobeissi Letter reported approximately $450 billion in market capitalization had been wiped from the S&P 500 in the minutes following the post. (2)

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But this momentary blip - from which the stock market has already recovered - wasn't so much a reflection of the cooking oil or soybean industries as it was an example of how swiftly investors can react to the words of influential figures. Especially one as powerful as Trump.

Politics of trade

China and the U.S. had several clashes regarding trade in recent months, including Trump recently threatening an additional 100% tariff on Chinese goods, adding further tension to the situation.

So, when the president talks about trade policy with America's biggest trading partner, even in passing, it has the ability to stir up the market. But that doesn't necessarily equate to an escalation in real terms.

Brad Setser, former U.S. trade official now with the Council on Foreign Relations, wrote on X: "So from 100% tariffs on all Chinese trade (in response to the rare earth/critical mineral export controls) to targeted sanctions on cooking oil? (3)

"Definitely not escalatory." (4)

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Knowing all of this, can your average investor do anything to protect their portfolio from the politics of trade?

How investors can protect themselves

If your portfolio leans on global trade, you could start by looking at your exposure. Are any holdings tied to sectors under threat of tariffs? Pay close attention to them. If you choose to hold, large companies may be able to absorb more pain and be in a better position for success afterward.

Keep your eyes open for risks like wider tariffs on equipment industries, supply chain snags that could drive up prices and possible pushback from targeted countries that may hit U.S. exports. Policy tweaks like new quotas, licensing rules, or export limits can impact trade volume. Official statements, trade hearings and regulatory filings can also be a good source of early warning signs.

Next, think about diversification. Inflation-resistant assets, including gold and real estate, can help cushion the blow if tariffs or trade barriers escalate.

And importantly, try not to panic sell. Market swings that are influenced by political headlines can fade fast, but don't ignore the risk altogether. Building resilience into your portfolio could be your best defense.

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Article sources

We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.

@realDonaldTrump (1 ); @KobeissiLetter (2 ); @Brad_Setser 3, 4 )

This article originally appeared on Moneywise under the title: Trump's China cooking oil threat cut $450B from market in minutes, watcher says - keep politics from frying your stocks

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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