Tariffs cause prices to rise. That's what they're intended for. The hope is higher prices will offset a perceived unfair trade practice. Historically the stock market reacted badly to increased trade restrictions. President Reagan used more open trade as a way of lowering inflation and invigorating the economy.
A pissing contest with China has serious risks (see CNBC article I link below). So far China has allowed its currency to devalue, virtually nullifying the U.S. tariffs while making all U.S. goods more expensive in China. This hurts, not helps, the economy.
China also holds a huge club. With north of $1 trillion in Treasuries, China could stop buying new U.S. debt or even sell. This would cause either higher interest rates or, if the Fed buys up all the excess Treasuries on the market, cause seriously higher inflation.
Every time Trump increases the trade rhetoric the market declines slightly, only to recover later as if nothing happened.
I'm interested in what people think about the evolving trade war. Will it continue expanding? At what point does it bite? American farmers are hurting bad (my dad is in the agricultural repair business and says its as bad as the early 1980s or worse).
With the economy humming along, why do we need to spike the economy? Tax cuts (I like them, but they might have been deployed better in a soft economy) and trade friction meant to increase U.S. economic vibrancy when there are so few available workers seems foolish to me. People say they want to retire as early as possible and then demand(?) more work? I don't get it.
CNBC has another good article on the trade issues with China. I'm interested in comment from outside the traditional media outlets. I see farmers suffering and less than happy they are the scapegoats in the trade war. Is anyone really willing to take one on the chin for a trade war when economically things are going so well? Is the industry you're working in feeling any affect from the trade disputes?
Thoughts.
https://www.cnbc.com/2018/07/19/4-lethal-weapons-china-has-to-help-win-the-us-china-trade-war.html
Submitted July 20, 2018 at 10:37AM by KeithTaxguy https://ift.tt/2mxBqIk
