Core Insights - The U.S.-China relationship is entering a critical phase as the Trump administration aims for a more favorable trade policy with China [1] - The U.S. has leverage in trade discussions due to its strength in aircraft engines, parts, and certain chemicals, which are essential for China [1] - Companies in aerospace and semiconductor sectors may experience both risks and opportunities due to the shifting policy environment [2] Aerospace Sector - The U.S. holds a significant advantage in the aerospace industry, as aircraft engines and parts are not easily substituted, making China reliant on U.S. and European manufacturers for aviation technology [3] - This reliance could lead to increased government support for American aerospace companies through contracts or preferential trade treatment, enhancing investor confidence [3] Semiconductor Sector - The production of high-performance semiconductors is currently concentrated in Taiwan, posing a risk to the global economy [4] - The U.S. is actively working to boost domestic semiconductor production, with the 2022 CHIPS and Science Act allocating over $52 billion to enhance capabilities [4] - Companies involved in domestic chip production, materials, and equipment may benefit from new capital inflows as a result of these initiatives [5] Risks for Companies Tied to China - Businesses that are heavily dependent on China for exports or critical inputs face vulnerabilities and potential disruptions due to the changing trade dynamics [6]

Group 1 - Domestic production of semiconductors, particularly having a fabrication facility in the US, is becoming an important factor in investment decisions over the next four years [1] Group 2 - The analysis of companies is based on tradeoffs of performance, reliability, and costs, reflecting a long-standing engineering approach [2]