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Costly Trade War Rolls On

September 23, 2019

The trade war has been going on for a year. And while I agree China needs to be held accountable for its actions, are tariffs the right answer?


China is culpable and deserves some sort of punishment. Theft of intellectual property and many other transgressions over the years mean action is warranted.


Regardless if tariffs are the right or wrong solution, President Trump has been focused, purposeful, and measured. He’s notified the world in advance of his actions and pointed about what China needs to do to avoid further sanctions.


In return, China has continued to break promises.


Another tariff on virtually all Chinese imports starts in December after being put on hold since late June. That’s when Presidents Trump and Xi agreed to key purchases and concessions at the G20 Summit.


Yet, nothing has happened.


So, President Xi forced President Trump’s hand because China didn’t follow through on its promises. And if the December tariffs happen, China will respond, which will only lead to higher prices for consumers.


If China had upheld its end of the bargain, we wouldn’t be in this situation. And now, it’s possible China could wait out our next federal election before making a trade deal.


What happens in the meantime? Nobody knows.


Going forward, the Chinese economy should continue to face pressure for the duration of 2019. Slow global growth and increased uncertainty will do that.


In fact, China’s economic growth has slumped to its lowest levels since 1992 because of the tariffs. Apple sales in China have tumbled, which is a big deal because the Chinese market accounts for nearly 20 percent of the firm’s revenue.


Here’s something we do know – as this war continues, nobody seems to win.

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Andrew Wood, Dan Simon and Alison Slezak are Investment Advisor Representatives. Advisory services are offered through CoreCap Advisors, LLC., a Registered Investment Advisor. CoreCap Advisors, LLC and Daniel A. White & Associates, LLC are separate & unaffiliated entities. 

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