Tariff Border Wall Built Higher
Don’t move, or the US will shoot! As a topsy turvy week for US markets draws to a close, the trade war crescendos again with yet more tariffs threatened against China. We’re starting to get used to this!
Just as the markets recovered from yesterday’s rate cut news, President Trump, armed only with his Twitter account, brought exchanges tumbling back down again! In a step backward for the global economy, written terms of a trade deal were crumpled up and lobbed toward the bins. Replacing them? American threats of 10% tariffs on the rest of China’s 300 billion dollars’ worth of remaining goods. It’s kicking off!
A year and half of bruising trade conflict has left China without a single product free of border taxes on its way into the United States. Trump is building his wall of tariffs taller and taller, confidently playing chicken not only with the second largest economy on Earth, but indirectly with the largest, his own! Swerving to avoid a macroeconomic disaster yesterday, the Federal Reserve cut interest rates to alleviate trade stress on the US economy and give stocks a boost. Turned out to be inspired timing!
10% tariffs are not nearly as brutal as some of the trade blows already struck, however. Scheduled for the 1st of September, this is more like a painful jab to China’s side, likely prompted by anger over broken promises. According to the US, President Xi hasn’t delivered on his vows to order more American agricultural products. China has come out guns blazing in the last few hours with its own side of the story!
Investors will spend today totting up the damage. US markets should expect retaliation from the East almost immediately, with most stocks caught in the cross-fire. Growth headwinds are turning gale-force, so expect long queues into safe havens and big tech growth stocks!