How The Trade War Is Going To Affect You And Your Family
As expected, trade negotiations with China concluded on Friday with no trade deal in sight. Treasury Secretary Steven Mnuchin called the negotiations “constructive”, and that helped calm the financial markets, but there really isn’t any reason to be optimistic at this point. The negotiations that happened this week did not even come close to producing a deal, and neither side is attempting to claim that there will be an agreement in the near future. Instead, it appears that moves are being made that could lead to a protracted trade war. In fact, according to Bloomberg the Trump administration has just given the Chinese another ominous deadline…
These tariffs would be in addition to the ones that President Trump just hammered China with. And Trump is not waiting to see how future talks with China turn out either. According to a statement from U.S. Trade Representative Robert Lighthizer, Trump has already initiated the process for implementing these new tariffs…
This is a very clear sign that negotiations with China did not go well.
If they had gone well, Trump would not be threatening China like this.
So it looks like we should all get prepared for an extended trade war, and this trade war is going to affect you and your family in a number of different ways.
First of all, we should all expect significantly higher prices at major retailers…
In particular, price increases will be felt most acutely at large retail chains such as Wal-Mart that purchase goods in massive quantities from China. Needless to say, this will hurt those at the bottom of the economic food chain the most.
Secondly, this trade war will potentially result in a loss of jobs and income for many Americans. In fact, the Trade Partnership estimates that 2.1 million U.S. jobs will be lost if Trump’s next round of tariffs is imposed…
Thirdly, economic growth would definitely be impacted by an extended trade war. The following bit of analysis comes from CNN…
Unfortunately, the truth is that the projections from Oxford Economics are way too optimistic. As I detailed yesterday, our trade war in the 1930s was absolutely catastrophic for the U.S. economy…
Fourthly, an extended trade war would mean big trouble for global financial markets. Over 2 trillion dollars of global stock market wealth has been wiped out so far, but that is nothing compared to what could be coming…
But the Trump administration can’t back down now, or else it would lose all credibility.
According to the latest numbers, we bought 539.5 billion dollars worth of goods from China last year but they only purchased 120.3 billion dollars worth of goods from us. For years they have been slapping enormous tariffs on us, stealing our intellectual property and making it exceedingly difficult for U.S. businesses to do business over there.
Meanwhile, they have been flooding our shores with cheap goods produced by government-subsidized businesses, and they have been getting exceedingly wealthy as a result.
So we can either allow them to keep taking advantage of us, or we can stand up for ourselves.
But let there be no doubt – standing up to China will be extremely painful economically. And at this stage of our society, Americans are not even equipped to handle a low level of economic pain.
A perfect storm is brewing, and this trade war is just a small part of it.
Sometimes you can try to do the right thing, but it turns out badly anyway. Standing up to China definitely needs to be done, but it is very difficult to see how this is going to end pleasantly. In fact, many believe that our relations with China are about to take a major turn for the worse.
We shall see what happens. As always, let us hope for the best, but let us also prepare for the worst.
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