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The Trump administration’s recent increase in tariffs is causing a trade war and losing investors trust in the market who are pulling the highest level of money from global stock-focused funds since the 2007-2008 financial crisis. Market trends such as these are worrying economists, and many have been very vocal that the slowing worldwide market and the escalating aggressive retaliatory trade war could plunge America and the world into a new financial crisis. Wall Street strategists are even citing projections that the tariffs will lead to a marked decline in the growth rate of the US real GDP in a very short amount of time. They are comparing our current volatile markets to ones that have been recorded historically before recessions.
New Trade Tariffs
The newly announced tariffs are as close to home as tariffs on metal from Canada and Mexico, and as diverse as tariffs on cars from across Europe. The nation hardest impacted is China, with a 25 percent tariff on $50 billion of imported goods. China has retaliated with its own tit-for-tat tariffs against goods imports from the US, and as a result, a chartable back-and-forth escalation of tariffs and trade actions has ensued. President Trump defended these Chinese tariffs as necessary in a release issued stating “These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs.”
Will Tariffs Help or Hurt the US Jobs?
Much debate has followed on whether these tariffs will really protect Americans and Americans jobs or hurt them. Ana Swanson of the New York Post expressed her opinion that such actions would be harmful to America in the long run, “Although the United States economy is especially strong, the tariffs are expected to drive up prices for American consumers as well as for businesses that depend on China for parts.” While proponents of the idea argue that especially in the light of China’s Made in China 2025 plan to rule high-tech and manufacturing industries, the move is necessary to protect American companies and their intellectual properties from being appropriated by the Chinese.
Only time will tell if tariffs and trade wars will dissolve into a new financial crisis. A recession could be around the corner, or if things de-escalate the ramifications could be as simple as less “Made in the China” labels and more “Made in the U.S.A.” labels in our grocery carts. ■