By Tyler Bauer
After the United States placed tariffs on $34 billion of Chinese goods, the Chinese responded by placing retaliatory tariffs on $34 billion of American goods. For reasons I can’t understand, the Trump administration has threatened to implement another round of tariffs on Chinese goods. This round would consist of 10% tariffs on $200 billion worth of Chinese goods if enacted. The Chinese have vowed to retaliate, but they haven’t made any specific statements on what their retaliation would consist of.
Predictably, stock markets around the world reacted negatively to Trump’s newest tariff threats. Markets in China, Hong Kong, Japan, and Europe fell. The stocks most affected by these threats were those with strong ties to the US, such as household appliances producer Qingdao Haier. While it may seem like these tariffs and the fall in stock prices only affects companies like Qingdao Haier, it is worth noting that the companies targeted are the ones that Americans like you and I do business with. Therefore, we will be indirectly affected and forced to either pay higher prices for the same products or find a new company to buy from.
Interestingly, the US stock market hasn’t been affected too much by the trade war with China – until now. Following President Trump’s announcement that he may place an additional round of 10% tariffs on $200 billion worth of Chinese goods, the Dow Jones fell 219 points on Wednesday. The Down Jones falling is largely in anticipation of the Chinese implementing even more retaliatory tariffs, which would directly impact American companies. Even though the Chinese haven’t announced their retaliation yet, the stock market appears to be bracing for the worst.
As for how China may respond, they may be forced to go beyond tariffs. China buys far less than it sells to America, so tariffs can only have so much of an impact on the American economy. Luckily for the Chinese, they have other options. China could withhold licenses from American companies wishing to do business in their country. Additionally, China could begin tax or antitrust investigations into American companies, making it difficult – if not impossible – to do business in China. American giant Qualcomm may have the most to lose in this situation, as the Chinese government has been playing hardball with the tech company for months.
Regardless of what happens, one thing is clear – trade wars hurt all parties involved. Producers and consumers in both countries are being hurt by these tariffs. The pain is now being spread to their stock markets, too, and even to stock markets in Europe. The fact that Europe is feeling the pain of a US-China trade war shows just how interconnected our world really is. Think of the international economy like a pond. Each and every action – whether good or bad – is like throwing a rock into this pond. The rock will only land in one part of the pond, but it will send ripples throughout the rest of the pond. Similarly, Trump’s new tariff threat would hit China but spread around the world. These tariffs hurt everyone, and it’s about time President Trump learns this.