The most recent escalation of US-China Tariffs has seen a commitment from China to raise tariffs on more than $60 billion worth of goods from the US. The results are already being felt. Most notably, in the US stock market. The Dow Jones Industrial Average has fallen more than 700 points since trading began Monday morning following the announcement that China’s latest round of tariffs will go into effect on June 1, 2019. Additionally, The S&P 500 dropped by 2.6 percent and the Nasdaq Composite fell by 3.5 percent.
US-China Tariffs: A Brief Background
In December of last year, President Trump introduced tariffs on $200 billion in Chinese goods, which resulted in a slight slowdown in the Chinese Economy. With two of the world’s largest economies in an active trade war, fears around the world of a global economic downturn quickly spread. Fortunately, fears were abated by renewed talks between the two countries over the following months. However, the economic ceasefire would soon be put aside as President Trump instated a new round of heightened tariffs on Chinese imports.
US-China Tariffs: The latest Exchange
The Chinese commitment to raise prices on US-made goods followed President Trump’s commitment to increase tariffs on more than $200 billion worth of Chinese manufactured goods last week. That round of tariffs would include more than 5,700 goods subject to as high as a 25 percent tariff, up from the previous 10 percent. Experts believe that the latest US-China tariffs will only make things worse for both economies.
Trump’s duty increase on Chinese exports came following allegations that China had backtracked on its agreement reigning in the alleged theft of intellectual property and pressures to hand over technology to companies manufacturing components in China. Trump has gone so far as to threaten an additional $325 billion worth of tariffs on other Chinese products.
After the most recent developments regarding US-China tariffs, Alec Young, managing director of global markets research at FTSE Russell in New York, stated regarding investor activity, “With the ultimate trade outcome inherently uncertain and difficult to model or predict, investors are selling first and asking questions later. Investors are increasingly worried an anticipated second-half profit rebound may now evaporate as President Trump’s threat to tariff the remaining $325bn in Chinese imports would disproportionately target consumer products like iPhones, thereby posing a greater threat to the consumption-driven US economy.”
US-China Tariffs: Who’s Affected
There are industries across the board that is affected by the ongoing trade war, particularly those incorporating steel and aluminum into their manufacturing operations. Listen firsthand to 12 top executives explain how the trade war has already affected their bottom line as far back as late 2018.
It remains unclear just how the latest round of tariffs will affect small and medium-sized businesses, which cannot as readily absorb cost increases when compared to their larger, conglomerate counterparts. However, based on reports, many are less than optimistic regarding the economic outlook.
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