2018 Recession: US-China Trade War Looms

Posted On April 4, 2018 2:27 pm

Last night China responded to Trump by announcing a list of 128 commodities and products it would impose tariffs if the U.S. follows through with its own list of some 1,300 Chinese imports being targeted for tariffs. As you’re about to see, this escalation could be the prelude to a 2018 recession.

These tit-for-tat actions are the carefully calculated opening salvos—they both add up to $50 billion on each side- in what many hope will result newly negotiated ‘win/win’ trade deal.  While there is still time to make a deal, the current deadline before the tariffs go into effect in May 22, many economist fear Trump may have overplayed his hand is creating a ‘lose/lose’ situation.

But each side deems it necessary to play hard ball, whether to save face with their respective citizens or in attempt to gain leverage and extract the desired concessions, this could lead the U.S., and potentially the global economy, into a recession.

Certainly, the stock market is expressing concern, as broad-based selling swept through, sending the major indices sharply lower on the opening.

So far Trump, who has in the past taken credit for stock market gains, seems unfazed, tweeting comments such as “Trade wars are easy to win.”  And “When you have a $500 billion deficit you have nothing to lose.”

Trump’s critics, which come from all corners ranging from farmers to Wall Street, contend that the President not only lacks a firm grasp of trade policy, but that he would also ultimately be hurting American consumers through higher prices on a broad assortment of imported goods.

But the hardest hit might be those in the heartland of Trump’s base supporters in the agricultural industry as China will be targeting imports of U.S. grains and meat products.  Prices of soybeans, cattle and pork have all tumble sharply on the news.

Other U.S. companies and industries expected to be hardest hit in trade war include Boeing (BA), Apple (AAPL) Starbucks (SBUX), automakers like Ford (F), and energy companies.

 Related: Rumors of Tesla Bankruptcy Are No Joke – Here’s Why

Tagged with:

About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

Related Articles