CLOSE
Leave a comment

You join us again to talk about trade wars. First things first, Mellody: are we in one now?

 As I mentioned in March, a trade war is the tit-for-tat raising of trade barriers – import duties, tariffs, or increased domestic subsidies – between countries. In the last six weeks, we have been moving in that direction. On Thursday, President Donald Trump threatened to escalate trade tensions with China, saying he was considering imposing tariffs on an additional $100 billion in imports from China.

This is on top of the $50 billion in imports from China that the Trump administration announced earlier this week. After the initial tariffs, China responded quickly, rolling out $50 billion in tariffs on American exports China that targeted politically powerful industries such as agriculture and aerospace companies. As of today, these announced policies have not taken effect, but if they are put in place will be hard to call it anything but a trade war, Tom.

 Why do countries raise tariffs? What does President Trump seek to achieve?

 Throughout history, countries have used tariffs, import taxes and other policies to protect domestic industries. For example, many countries that have used import tariffs to shield their automotive and agricultural sectors. President Trump has stated that his actions are intended to protect specific industries.

As you know, the first tariffs her announced were aimed at foreign steel and aluminum. In addition, the president wants to use tariffs to reduce our trade deficits with other countries, especially China. The president campaigned on this issue, saying he believed other countries were taking advantage of the United States.

Will these tariffs help reduce our trade deficit?

Most economists do not believe that tariffs alleviate trade deficits, and past experience bears that out. In the 1980s and 1990s, the US employed a number of policies intended to slow the flow of imports from Japan and reduce our trade deficit with that country. It did not work.

Which industries are likely to be hurt most by a trade war with China?

There are several players that are likely to feel the pinch if trade tensions continue to heat up. First, let’s talk about the export side. The export of US goods and services to China supported more than 900,000 jobs across numerous sectors in 2015, the latest data from the Department of Commerce.

From the industry perspective, the biggest losers are likely to be American agriculture, who in 2016 sold $21 billion worth of farm products in China, and American manufacturers. In 2016 sales, aircraft companies exported $15 billion in products, machinery companies exported $27 billion worth of goods to China last year, and automakers, whose exports to China accounted for $11 billion.

Industries dependent on imports will get hurt too, especially those importing electronics, textiles, metal, apparel and footwear, and plastics. A huge number of companies fall into one or more of these buckets, Tom.

What effect will this have on consumers? What about the stock market?

Higher import duties will cost American consumers more money, Tom. As I mentioned, apparel, electronics and plastics are all facing higher tariffs, and those costs will be passed along to consumers. Stocks are also getting hit, Tom. The markets hate uncertainty and a potential trade war has uncertainty in spades. On Friday, anxious investors sent stocks tumbling.

The Dow Jones fell more than 570 points, or 2.3 percent in one day. Combined with investor concerns about Trump’s aggressive stance toward Amazon and concerns about Facebook’s privacy protections, there was a lot of volatility on Wall Street last week.

However, for those worried about how this could impact you, do not let this volatility affect your investment strategy. Keep in mind that you are investing for the long-term. Like other market bumps, this could get worse before it gets better, but this too shall pass.

 

READ MORE STORIES ON BLACKAMERICAWEB.COM:

GET THE HOTTEST STORIES STRAIGHT TO YOUR INBOX: 

Mellody Hobson is President of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts. Additionally, she is a regular financial contributor and analyst for CBS News.

 

Also On Black America Web:
Find Out What Your Favorite Celebs Did On Instagram (09/01-09/07)
10 photos

One thought on “Money Mondays: How Would A Trade War Impact You?

  1. A trade war would make American’s have to pay more for items shipped to this country that are marked “made in China.” That is practically every damn thing!!!!!!!

    Chump needs to STFU!!!!!!!!!!!!
    He is about to write a check his DUMBASS CAN’T CASH!!!!!!!!!

Add Your Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s