on the campaign trail, president-elect donald trump talked tough on trade. but to judge from a rally in stocks, investors think these were idle threats. that is odd, given how critical mr. trump has been of trade policy . it is also surprising given how critical global trade is for most major u.s. companies. whether trade restrictions help or hurt the u.s. economy, they likely would be very bad for stocks. trade plays a massive role in the u.s. economy and for u.s. companies. combined, exports and imports now amount to 27% of gross domestic product, versus 17% 30 years ago. s&p dow jones indices calculates that companies in the s&p 500 generate about 44% of their sales abroad . mr. trump will have significant latitude on trade , including the power to terminate trade agreements without congressional approval. he appears set to push for substantial changes to the north american free trade agreement. likewise, mr. trump wouldn<u+2019>t need approval to significantly raise tariffs and impose quotas, though he could run into legal fights in the u.s. or at the world trade organization. for two centuries, economic theory has held that trade increases the size of the global economic pie. the problem is the gains from that growth are spread unevenly . the winners include u.s. companies that were able to substantially lower costs and boost profit margins. the losers include many of the blue-collar communities that supported mr. trump. trade restrictions would hurt profits in multiple ways. tariffs on imports would drive up costs for businesses and consumers that buy those products. businesses might be forced to seek out domestic alternatives to their imports. this would drive up costs for companies such as apple and nike . supply chains would be upended. exporters such as boeing could face retaliatory trade measures from other countries. many u.s. companies are global players that rely on good economic relations with other countries. in 2014<u+2014>the last year with available commerce department data<u+2014>the majority-owned overseas affiliates of u.s. multinationals booked $4.1 trillion in sales. and at many multinationals, overseas operations count for the bulk of business. 3m , for example, booked 60% of its sales outside the u.s. in 2015. for mcdonald<u+2019>s , it was 66%. for colgate-palmolive , 74%. mr. trump may be trying to win a few trade concessions and prompt manufacturers to add a bit more to their u.s. workforces. that appears to be what happened with ford . but investors may want to think a little harder before putting too much stock in that rosy scenario. write to justin lahart at justin.lahart@wsj.com
trade war<u+2019>s biggest loser<u+2014>stocks  - wsj
justin lahart