The new round of US tariffs on just about all Chinese imports may help Rio Tinto Limited's (ASX: RIO) course in a perverse way, although shareholders won't be getting that impression today.
Our biggest iron ore miners are taking a sharp hit today with the Rio Tinto share price tumbling to a six-month low in morning trade after it posted its half year results.
The Rio Tinto share price fell 3.7% to $94.10 while the BHP Group Ltd (ASX: BHP) share price lost 3.2% to $38.99 and Fortescue Metals Group Limited (ASX: FMG) share price crashed 6.6% to $7.60.
In contrast, the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index is down 0.6% after US President Donald Trump said he was imposing a 10% tariff on US$300 billion of Chinese imports that weren't affected by earlier rounds of tariff increases.
Is the Rio Tinto share price a buy or sell?
The question facing investors is whether the sell-off in Rio Tinto share price represents a buying opportunity given that its slightly softer interim profits was offset by a surprise US$1 billion special dividend.
The good news is that most (if not all) brokers who rated the stock a "buy" before its results are sticking with their bullish recommendation on the stock.
The fact is, Rio Tinto is flushed with cash and even its operational hiccups won't stop it from handing back more cash to shareholders at its full year results in February.
The iron ore price remains stubbornly high despite predictions by some experts that the commodity will come crashing under US$100 per tonne in the near-term.
Risk to the iron ore price
There's certainly the risk that this could happen given that major iron ore producer Vale SA is believed to be restarting some of its shuttered mines although that may not necessarily send the price of the steel making commodity reeling.
This is because China is likely to inject extra capital into infrastructure projects to offset the slowdown from the escalating trade war.
It's "do or die" for the Chinese government to ensure economic growth stays above 6% and to provide jobs for its citizens, or it will face social unrest. The riots in Hong Kong highlights this imperative as mainland Chinese can't understand why Hong Kong citizens won't give up some personal rights in exchange for economic growth.
Further, the trade war won't have much impact on iron ore compared to other metals like copper. This is because steel is a primary input for building bridges and railways.
This doesn't mean a quick recovery for the Rio Tinto share price, but I think any significant sell-off represents a buying opportunity for this high-yielding stock.
