The Trade War With China Begins

If President Trump was hoping that China would back down at the last minute, he will be disappointed when he reaches the Oval Office this morning. Within minutes of US tariff increases last night, China announced a 25% tariff on American products including soy beans and cars exported to China. Both increases will be levied on about 34 billion dollars worth of exported goods.

Bloomberg Business: "Neither side shows any signs of backing down. Trump is already eyeing another $16 billion of Chinese goods and suggesting the final total could top $500 billion, more than the U.S. bought in 2017. China’s Commerce Ministry accused the U.S. of “bullying” and igniting “the largest trade war in economic history.

”The first ever U.S. tariffs aimed just at China will likely rally Trump’s voters who agree with his “America First” argument that Beijing hasn’t played fair for years, stealing America’s intellectual property and undercutting its manufacturers.

But the risk is that a spiraling conflict undermines economic growth by gumming up international supply chains and inflicting higher prices on companies and consumers. The Federal Reserve has already noted some firms are slowing investment, while Harley-Davidson Inc. and General Motors Co. are warning they may cut jobs."

So far, Wall Street has shrugged off the increases, thinking that both sides will back down and find a compromise rather than let the trade war spiral out of control.

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