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The state of the Trade War

8-27-2019

William Santoro, Contributing Writer

The impact of President Trump’s trade war with China is being felt here at home, as our stock market continues to tumultuously drop. Wall Street analysists have started warning their clients about elevated risks of recession, and given the recent trends, experts say a recession is in our future. Multinational banking conglomerates, Morgan Stanley, even fear that the global economy would fall into a recession if the United States were to continue to raise tariffs on Chinese imports; an impact that could be realized as soon as six to nine months after the tariffs take effect. 

China has not been too keen to the United States’ tactics thus far, and have retaliated with their own set of tariffs, causing markets to drop even more. The trade war is heavily influencing near term investments, and investors are preparing for high volatility as there seems to be no limit as to where the two opponents will draw the line in order to edge each other out. Trump has recently been contemplating raising tariffs even further, from twenty-five percent to thirsty percent, an announcement that saw anxious investors fleeing the market, leaving the Dow to close 623 down.

While both US and Chinese businesses will do their best to adjust their strategies, uncertainty once again, wreaking the most havoc on both markets. The president of the United States, unfaltering in his recent decision to raise tariffs, expressed frustration that perhaps tariffs should have been raised even higher. Economists and financial analysts are worried for what the future of the trade war will look like if we continue to aggressively fight this battle. Luckily, it seems the Chinese have also started to get worried. 

With the first of September set to bring the onset of the newly imposed tariffs, Chinese leaders, according to President Trump, reached out to US officials Monday in order to try to negotiate an agreement. President Trump seems keen to the idea of an agreement being reached soon, even praising Chinese President Xi Jinping as a great leader, someone he called an enemy just days prior. Could these two sides be easing up, realizing that the chaos and uncertain is just deadweight on their already slowing economies? 

Unfortunately, there is no clear answer as to when negotiations will take place, if they still take place after the G7 summit. While it may seem a no brainer that the Chinese will hurt more if tariffs are greater, since they export more to the US than they import, President Xi is shielded from public whiplash whereas President Trump still needs to secure an election victory to continue the trade war, something that may be a bit more daunting if the US economy starts slipping even further. If negotiations fall through, the US and China can be in standoff for months, if not years to come.