Trump’s Trade Wars

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Published by Taylor Financial Group

With all the confusion and uncertainty surrounding Trump’s trade war, it’s important to try to understand the situation. There have been many rapidly changing developments over the past few months, and it’s understandable that many people will not be well educated on the complex issue.

Historically, large tariffs have led to market declines, as tariffs lift costs, cause shortages, and hurt corporate profits. Hurting the economy of a neighboring nation won’t help America, but instead brings both nations down, a lesson that Trump has yet to learn. To read more on how Trump is escalating his trade rhetoric, click here for The Wall Street Journal’s, “The Trade Causalities Mount“.

Although Trump says that America will win a trade war, that’s just wrong. Most economists agree that everyone will lose. Trade wars and trade hostility with China hurt world trade and world profitability. Economists also say that trade restrictions make the economy less efficient, as domestic companies lose the incentive to increase efficiency or specialization, as competition from abroad is increased. To read Kiplinger’s article on “8 Products That Soon May Cost More Due to Trump’s Tariffs“, click here.

China might even be the country that benefits most from the US’ actions, as Xi Jinping is a big proponent of global trade and can capitalize on America fighting with its trade partners. In addition, the trade war could help China internationalize the Yuan, and hurt the Dollar’s traditional role as the World’s Reserve Currency, a position that its held for over 50 years.

It’s not uncommon to seek guidance in these confusing times, and we are hopeful that cooler heads will prevail. But remember that the US economy is strong enough to weather trade storms and that although we are seeing some challenges already, the true effects of this trade war won’t be felt for another six to twelve months. Most of all, don’t overreact. Markets are strong and resilient, and there are many investments that will reduce any potential fallout from market volatility. And don’t be afraid to contact us with any questions or concerns you have in months to come.

 

 

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