Attack of the Tariff! | June 22, 2018

The week started as it ended the prior Friday.  Attack of the tariff from every angle!  What could tariffs mean for growth during the second half of the year?

Tariffs

The focus was on tariffs as the week started, but rather than the threat to move the needle for negotiations, we have tangible amounts, products, and start dates from the US.  We also have the threat of retaliation from the EU, China, and Canada.

Perspective

Something to keep in perspective is that China exports approximately $500B in goods to the US annually, while the US exports approximately $130B in goods to China annually.  So, when the US is tariffing $50B in goods, a ‘tit for tat’ response would be to tariff $13B in US goods, not $50B. Regardless, the wave of tariffs seems to be moving the needle from trade negotiations to a trade war…

Conclusion

The problem with all of this is that tariffs cause their own consumption friction.  Consumer appetites may not persist with:

  • Consumer Prices (CPI) climbing to 2.8% year over year.
  • The assumed increase in costs from tariffs, never mind the cut to profits.
  • Increased borrowing cost as a result of higher interest rates from the Federal Reserve.

These things combined may be enough to cause the consumer to go into hibernation.  Such conditions could lead to the big R word…

 

Your interest in our articles helps us reach more people.  To show your appreciation for this post, please “like” the article on one of the links below:

Facebook | Twitter | LinkedIn | Google+

FOR MORE INFORMATION:

If you would like to receive this weekly article and other timely information follow us, here.

Always remember that while this is a week in review, this does not trigger or relate to trading activity on your account with Financial Future Services.  Broad diversification across several asset classes with a long term holding strategy is the best strategy in any market environment.

Any and all third-party posts or responses to this blog do not reflect the views of the firm and have not been reviewed by the firm for completeness or accuracy.

Leave a Reply

  • (will not be published)

XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>