This week in Trumponomics: China to the rescue!
The stock market got some relief this week — when China indicated it will not further retaliate in the trade war with President Trump.
August was escalation month, with Trump announcing new tariffs, China responding with new tariffs of its own and Trump then raising his tariffs further. Trump even went as far as “ordering” U.S. companies to find an alternative to China in an August 23 tweet, a goofy, faux-Stalinist move that earned Trump a FAILING score on last week’s Trump-o-meter.
Things were calmer this week — largely because China said it did not plan to ratchet up the trade war another notch. The S&P 500 plunged 2.6% on August 23, the day of Trump’s final escalation. But stocks erased most of that loss this week, on the soothing (for now) news from China. This week’s Trump-o-meter improved one mark, to WEAK.
Despite a temporary respite, Trump’s trade war with China is getting worse, not better. New 15% tariffs on thousands of everyday consumer items imported from China — including shoes, clothing, TVs, printers, sporting goods, and many other things — go into effect Sept. 1. Retailers say they’ll have no choice but to pass those tariffs onto consumers.
The 15% tariff goes into effect on another batch of consumer products imported from China on December 15. It’s possible there will be a deal by then, obviating the need for tariffs. But in more than a year’s worth of negotiating between Trump and China, there have been no breakthroughs, only escalations. JPMorgan Chase estimates the China tariffs Trump has imposed and scheduled will cost the typical American household more than $1,000 per year.
The broader U.S. economy has survived the tariffs, but as the trade war intensifies, it’s causing more measurable damage. Consumer confidence dropped in the latest University of Michigan survey, largely because of the forthcoming tariffs on consumer products. The pace of business spending is declining, and the U.S. manufacturing sector is shrinking — both related to falling business confidence caused by the trade war.
And it’s possible investors snapping up stocks this week are too optimistic about the prospect of a truce. While China declined to raise tariffs further on U.S. imports, it can still boycott American products or give other trading partners better terms than American importers — so-called “non-tariff” measures. And China has given no sign whatsoever that it’s willing to give in to U.S. demands for reforms. The Trump tariffs we’ve got could be with us for a good long while.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman
Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.
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