Unless you’ve been living under a rock, you’ve probably heard of Taylor Swift’s new album and a thing or two about trade tensions between the U.S. and China.
You see, these global superpowers have been at it for more than a year already, threatening and actually imposing tariffs at each other with hardly any endgame in sight.
It’s hard to pinpoint where and when it all began, but many blame Trump’s “America First” campaign for inciting all the drama. Recall that the Donald has promised to hit back against unfair practices of U.S. major trading partners, including Mexico and China.
Of course Beijing didn’t take this sitting down, as it has been lashing right back with retaliatory measures on U.S. goods. Both sides have been attempting to settle things down through negotiations, but the mess just seems to be getting bigger.
Here’s the latest set:
- U.S. tariffs on $300 billion worth of Chinese goods, with the first batch set to take effect on September 1 and the second batch due on December 15
- Chinese retaliatory tariffs on $75 billion worth of U.S. goods, 5% and 10% tariffs on more than 5,000 products and reinstated tariffs on on U.S. automotive and auto parts
Now if these numbers aren’t scary enough, a walk down memory lane should put things in perspective.
July 2018: U.S. implemented 25% tariffs on $34 billion worth of Chinese products, which were matched by ChinaAugust 2018: U.S. slapped 25% duties on $16 billion worth of Chinese products, also matched by China
September 2018: U.S. upped the ante with tariffs on $200 billion worth of Chinese products. China targeted only $60 billion worth of U.S. goods.
A truce was called afterwards to give time for negotiations, but this didn’t last very long.
Here’s a look at how U.S. and Chinese markets have reacted to last year’s jabs:
If you’ve been mentally crunching the numbers, you can probably tell that the latest batch of tariffs from the U.S. is even larger than the total imposed throughout 2018. Could this mean a bigger market selloff in the works? Duhn duhn duhn…
And who could forget the slump in business optimism, drop in commodities demand, and overall economic havoc that this trade war has caused so far? Heck, it was enough to convince several central banks to start cutting interest rates again!
Many worry that escalating tensions could bring about yet another set of tit-for-tat tariffs, possibly even snowballing into a global recession. Officials from both nations and world leaders have urged restraint and clarity, but market watchers don’t seem to be banking on a trade agreement anytime soon. Think this could get any worse?