What will Chinese sanctions do to the US economy?
President Donald Trump’s war of words with the Chinese shows little sign of abating at the moment. Mr Trump has stepped up pressure on the world’s second-biggest economy by announcing another $16 billion worth of tariffs on Chinese-made goods that are imported into the United States.
China responded quickly by announcing tariffs of its own on $16 billion of American-made goods that are imported into China. In this article, we’ll examine how we got here and what the potential endgame is for the current tariff and trade war.
Tariffs In The News
President Trump has made it clear that his America First trade policy will involve punitive tariffs on countries that he believes are not playing by the rules.
China is the one major economy that has so far felt the wrath of these tariffs, and its currency and stock markets have suffered significantly as a result. Trump spent several months threatening to impose significant tariffs on EU goods before stepping back from the brink following a major EU-US meeting at the White House.
Impact On US Economy
So far, the impact seems to be minimal. The US economy appears to be powering ahead without issue thanks in large part to the significant tax cuts that Trump managed to push through.
However, if both countries continue to ratchet up the tariff war, there is every chance that the stock market will start to suffer as a result. Ironically, however, the US dollar may become stronger in the event of a trade war as it is often a ‘safe place’ that investors tend to flee to during periods of economic uncertainty.
There is also the issue of whether the US economy is in a position to cope with the event of a broader global economic shock.
It’s possible that the economy’s level of overstretch at the moment may leave it very exposed in the event of a bigger downturn – making any economic shock far worse for the economy, stock market and consumers in general than it otherwise would have been.