U.S. Trade Update

The U.S. continues its controversial trade policies with the rest of the world; most notably China. In early July, the Trump administration levied 25 percent tariffs on $34 billion of Chinese imports, only to have China respond in kind.1  While consumers can expect to pay higher prices in the wake of this trade war, investors have experienced some market turmoil but are waiting patiently for a potential surge.

Overview

At the heart of President Trump’s policy is his conviction that China has used predatory tactics to challenge American technological dominance. He has accused the country of obliging U.S. corporations to trade technology for access to the Chinese market, as well as outright cybertheft.

Initially, the Trump administration placed tariffs on industrial products so that American consumers would not be impacted. However, the list of Chinese imports has subsequently expanded to a wide range of household products, from electric lamps to fish sticks.2

Note that import tariffs affect entire supply chains in addition to the specific goods taxed. Ultimately, this could lead to the distribution of cheaper raw materials that could impact the quality of consumer goods and manufactured commercial products.

“Although tariffs could cause prices for consumer products ranging from cars to washing machines to rise, ‘the U.S. does not need China as much as China needs the U.S.’”
— Barry Bannister, head of institutional equity strategy at Stifel3

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1CBS News. July 11, 2018. “U.S. unveils tariffs on $200 billion more in Chinese imports.”
https://www.cbsnews.com/news/u-s-unveils-tariffs-on-200-billion-more-in-chinese-imports/. Accessed Aug. 1, 2018.
2Ibid.
3Adam Shell. USA Today. July 26, 2018. “Trump trade war: U.S. stock market is faring better than China’s since dispute
began.” https://www.usatoday.com/story/money/2018/07/26/stock-market-says-u-s-winning-trade-war/
832596002/. Accessed Aug. 1, 2018.

 

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