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America’s ongoing tariff trade war
Elena Duggar believes that looking at the developments of the last several days, this trade war situation is going to be sticking around for a while: “We are looking at a prolonged trade dispute between the U.S. and China,” the chair of the macroeconomics board at Moody’s Investors Service said. As Bold Business co-host David Grasso mentioned, the trade war is “tit for tat,” with one side putting up tariffs and then the other side putting up tariffs as well. The question becomes: “When does it stop?”
How will the American economy fare?
What is the economic damage of a prolonged and escalating trade war with China, and possibly other countries as well? Duggar said that it is “several-fold.” For the U.S. economy, the impact likely will be felt more pronouncedly next year rather than in 2018. As of this moment, if “[the U.S.] sticks to the [tariffs in place], the situation will probably be more manageable.”
There are three phases of tariffs. One phase came into effect last week and affected roughly $30 billion dollars worth of goods for both the U.S. side and the Chinese side (which Duggar noted is relatively not too huge of a number). The second phase of tariffs will arrive sometime around the end of July or at the beginning of August and will impact about $20 billion worth of goods on either side.
The third, final and largest tariff installment phase will implicate the largest amount of products as well as the broadest range of products on either side. These likely will come into effect around September or October and will capture roughly $200 billion dollars worth of goods for either side. Although this is, combined, only 0.1 percent of the U.S. GDP, Duggar noted that it is manageable while also a growing number. These tariffs will cover about half of the U.S imports from China.
How will Americans be affected exactly?
For the average American, these tariffs will not completely derail the economy although it might, for instance, undo some of the positive effects of the most recent tax reform. “We still think that the economy will grow close to 3 percent this year and 2.5 percent next year,” Duggar said, reassuringly.
Is America the bad guy here?
Will the cumulative effect of having so many nations mad at the United States be ultimately devastating? Duggar believes that the several big disputes transnationally could, hypothetically, lead to a global restriction of trade agreements with nearly each and every nation around the world retaliating in some way. “The risk is there,” she said.
Takeaway
One impact of the ongoing trade dispute, Duggar surmised, is that companies that do not like uncertainty (all of them) will become more careful with their money. Investors that do not like uncertainty also will become more careful. Therefore, when these companies and investors notice how uncertain the trade market might soon become, they very well may withhold their investments. If the investments don’t come then growth does not come later on down the road, either. And production relocation might also be a response from disgruntled businessmen and businesswomen.
In short, there are definitely some possible major global changes on the horizon. Especially, as Duggar said, “because we are more likely [than not] to see escalating trade measures and more likely to see a prolonged trade dispute.” This is not good for either the economy or the average consumer.
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