Perspective On The China U.S. Trade War


The U.S. trade war with China continues to dominate headlines of late. With the most recent news of additional tariffs to be imposed on Chinese imports, many may be wondering what this means for our future economic outlook. While there is much uncertainty when it comes to all things trade war related, below are a few key points to keep in mind when digesting information from various news outlets:

  • The House is soon expected to announce tariffs on an additional $200B of imports from China, which forecasters believe will take effect in October.
  • The overall rate on the additional $200B in tariffs is likely to range between 10% and 25%.
  • If the worst-case scenario plays out (where ALL trade between the U.S. and China becomes subject to a 25% tariff), the negative impact on the economy is likely to be limited, as exports to China only account for 0.9% of GDP.
  • The worst-case scenario is unlikely to weigh on U.S. GDP growth by more than 0.2% in the first year, economists forecast.
  • For a variety of reasons, the impact on U.S. inflation is also likely to be relatively small, especially if the dollar continues to appreciate against the Chinese currency, which is anticipated by many economists.

For more detail and supporting arguments, please visit the following link from one of the most highly regarded macroeconomic research firms in the world:

https://research.cdn-1.capitaleconomics.com/664dd5/trade-war-with-china-not-a-big-risk-to-the-outlook.pdf

THE ABOVE COMMENTARY, AND ANY OPINIONS CONTAINED THEREIN, REPRESENT THE VIEWPOINTS AND RESEARCH OF DANIEL COHEN, SENIOR INVESTMENT ANALYST AT SUMMIT EQUITIES, INC. AND SUMMIT FINANCIAL RESOURCES, INC. THE VIEWPOINTS DO NOT NECESSARILY REPRESENT THOSE OF ANY PERSON AT SUMMIT FINANCIAL RESOURCES.
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