Why America’s Trade War With China Will Be Absolutely Crippling For The U.S. Economy

If China does not match each round of tariffs they will look weak, and if Trump does not keep raising the ante every time China matches him then he will look weak.

So where will this end?

Ultimately the goal is more balanced trade with China, which would mean more jobs and more factories here in the United States.

But in the short-term we won’t see any of that.

Instead, all we are going to see is tremendous pain.

First of all, you should expect to see higher prices on any products that are made in China. This is going to hit consumers that shop at Wal-Mart and the dollar stores particularly hard.

Secondly, any companies that sell products in China are going to be hurting. It is inevitable that some will start laying off workers, and that means that there will be job losses here in the United States.

And even the expectation of lower profits will send stock prices tumbling. In fact, we already started to see this happen on Monday…

Major American companies that generate a significant chunk of their sales from China, such as Boeing (BA), Caterpillar (CAT), Intel (INTC) and 3M (MMM), were among the losers on the Dow on Monday.

The Dow has fallen nearly 1.5% in the past week and is close to erasing its gains for the year. If a global trade war breaks out and slows economies around the world, it could bring an end to the bull market that has raged for more than nine years.

In the short-term, nothing good is going to come out of this trade war.

And even in the mid-term, the pain is going to far, far outweigh any benefits.

This is why a trade war should always be a last resort. As much as possible should be accomplished through negotiations, and it is unclear if negotiations were utilized as extensively as they could have in this case.

If China wants to play hardball, they could start dumping U.S. Treasuries or cut off our access to rare earth elements. If they pulled either trigger, our level of pain would instantly be multiplied.

We can definitely hurt China too, but we do not have any magic bullets that will force them to yield.

Once a trade war begins, it can potentially last for many years, and let us not forget that history has shown us that trade wars can often lead to shooting wars.

I believe that a tragic strategic mistake has been made, and this is not going to end well.

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EU

Shoppers face higher prices on jeans, bourbon and peanut butter as May backs EU retaliation over US steel tariffs - but Trump hits back by slapping 20% tax on car imports

EU retaliating for Donald Trump's punitive tariffs on steel and aluminium imports

Taxes raised on typical US goods including jeans, bourbon and peanut butter

Mr Trump vowed to hit back immediately with a 20% tax on imports of cars

PM's spokesman says she backs reprisals but warns against further tit for tat

Mrs May was among leaders who rebuked Mr Trump over tariffs at G7 summit

Shoppers are facing higher prices on jeans, bourbon, orange juice and peanut butter as Theresa May backed EU trade reprisals against the US that come into force today.

Brussels has slapped higher duties on around £2.5billion of typical American products in retaliation for Donald Trump's decision to impose tariffs of 25 per cent on steel and 10 per cent on aluminium.

But the spat is on the verge of erupting into a full-blown trade war this afternoon after the US president vowed to hit car imports with a 20 per cent tax.

The dramatic escalation could potentially deal a devastating blow to the UK, as 15 per cent of all car exports end up in the US.

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