September 18, 2020 09:39 PM RSS


  • Wall Street Rebel | James DiGeorgia
  • 05/10/2019 2:13 PM

After raising tariffs on $200 billion of Chinese products from 10% to 25% and threatening to put 25% on the remaining $300 billion of imports, President Trump said in a tweet storm Friday morning that he is in no rush to finish trade negotiations with China.


By James DiGeorgia

President Trump has still not figured out that the old saying… “No one wins in a trade war”… is absolutely true.

Last night at midnight U.S. increased tariffs on $200 billion of Chinese products from 10% to 25%. The Chinese Commerce Ministry quickly issued a statement after the midnight deadline for the tariff hike that it would retaliate against the American move.

Trump also has threatened to impose 25% tariffs on the remaining yearly $300 billion of Chinese imports. The increased tariffs will likely result in China ceasing all U.S. agricultural purchases even though Trump believes stated in a tweet…

"Talks with China continue in a very congenial manner - there is absolutely no need to rush."

…American farmers and China dependent business across the United States are surely not in agreement on the urgency. The President’s decision to ramp up his trade war with the latest round of increased tariffs on Chinese imports could cost 900,000 U.S. jobs. And according to Katheryn Russ, an economics professor at the University of California at Davis this latest round of tariffs will add another $500 a year in costs for the average American household.

However if tariffs of 25% are imposed on all imports from China, and Beijing retaliating in response U.S. GDP would take a hit of about 0.5%, leaving the economy around $45 billion smaller by 2020 than in a world without tariffs. Bottom line real GDP growth — growth minus inflation — would approach dangerously close to 1% by the end of 2020.

Meanwhile, the latest analysis suggests China’s GDP growth would also be reduced, by around 1.3% in 2020. This would slow China’s growth to a 5% annual pace. Even more shocking is world GDP would suffer a significant 0.5% contraction. With the global economy slowing down and President Trump also waging a trade war against the European Economic Union (EEU) Trump’s trade war could push most of the world into a recession. U.S. farmers and businesses WILL feel the consequences of this slowdown despite Trump’s bravado.

 The Chinese are likely to play defense by…

·        Allowing its currency, the Yuan to fall 25% from $6.60 to $4.95.

·        Ceasing all agricultural purchases.

·        Withdrawing all support for U.S. sanctions against North Korea and Iran

·        Making U.S. imports all but impossible.

·        Forging a trade agreement with the EEU that undermines U.S. imports into the EEU. 

This last defensive play, leveraging the EEU may be the kicker that inflicts unnecessary and utterly avoidable pain on the United States. Trump’s vitriol against the EEU at a time when the member nations must decide to support Trump’s renewed sanctions against Iran is poorly timed.

So, when Trump sent out a tweet rant defending the tariffs saying …

"tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind."

He demonstrated that he is an economic moron. His willingness to call himself a tariff guy may prove to be a disaster in his 2020 reelection campaign in red states like Iowa, Kansas, Florida, Texas, Louisiana, and Missouri. Especially if he compounds American’s fears over healthcare with his DOJ working at full force in the courts to see Obamacare ruled unconstitutional. 

The Dow Jones Industrial Average has lost more than 750 points and the S&P 500 has lost about 3%, thanks to all three major indexes falling on Friday in response to Trump’s ramblings and poor decisions.

[Strategic Investment: The Post WWII World Order is About to Collapse]

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