18.06.22 Trade War

June 22, 2018
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A revved up U.S. economy has given President Trump the ammo he needs to pull no punches on trade.

What to know as China & Europe prepare to hit back.

Tit for tat trade War

Where Things Stand Now

  • US will slap a 25% tariff (or tax) on $50B in imports from China.
  • China hinted at retaliation, but Trump threatened even more tariffs, up toA 90% of all Chinese goods imported to US ($450B).
  • US says it has no choice after failed negotiations to alter China’s “unfair practices.”
  • Tariffs make US-made goods cheaper vs. imports.
"China does have much more to lose than we do."
Peter Navarro, Trump trade adviser

  • With Trump’s latest threat of $450B in tariffs, China can now no longer issue a proportional response.
  • US buys nearly 4 times as much from China as it sells to us. (Translation: China needs the US.)
  • That said, China’s $13T economy, can turn to other countries to sell its goods.
"Mr. Trump seems to be counting on the fact that China will soon run out of room to retaliate… This could prove to be a miscalculation."

Eswar Prasad, Cornell University trade expert & Brookings Sr. Fellow on China's other options for retaliation like disrupting American businesses' sales operations & supply chains in China.

And It’s Not Just China…

  • US businesses have to pay a 25% tax on steel or 10% tax on aluminum when they import them from the EU, Mexico & Canada.
  • In retaliation, the EU is set Friday to slap tariffs on $3.4B in American products (i.e. whiskey, motorcycles, peanuts & cranberries.)

The US economy is on track to expand at the fastest rate in more than a decade, but fears of a trade war have sent stocks to the longest losing streak in 15 months. If stocks end lower Friday, it will be worst 9-day streak since 1978. Goldman Sachs says buckle up.

by Jenna Lee,