The latest tariffs in the ongoing U.S. – China trade war were implemented over the weekend, and this could result in higher prices for American consumers in the coming weeks. While damage should be mostly limited until after the holiday shopping period, it’s likely that some distributors and retailers will raise their prices to cover the additional tariffs.
This round of tariffs will be applied to $112 billion worth of imports from China, at a rate of 15%.
Bad News for a Slowing Economy
The United States economy is still growing, making the current period one of the greatest expansions in history. However, the rate of growth is starting to slow. While a recession is not likely in the mid-term future, a slowdown in growth will have an impact on consumers, businesses, and the stock market.
87% of clothing and textiles will be impacted by the latest tariff increase. 52% of shoes sold in the U.S. will also be affected.
Consumers make up the majority of U.S. gross domestic product, so any slowdown in spending will strengthen the chance of a recession within the next five years.
Senator Pat Toomey, the junior Republican from Pennsylvania, said in a recent interview with ABC that “We have got a great economy, but I do think that the uncertainty caused by [a] volatile tariff situation and this developing trade war could jeopardize that strength, and that growth.” Toomey said that the negative impact of the trade war was “a legitimate concern.”
American producers will also be harmed by the latest round of tariffs. China retaliated with its own tariffs, with hikes ranging from 5% to 10% across items like American corn, pork products, marble, and rubber products.
China’s tariffs will be applied to about $75 billion worth of American goods, which will hit agricultural producers hard.
What Tariffs Means for the Stock Market
Stock futures are already lower this week, with investors fearing a volatile situation similar to the end of the year in 2018.
While investors could see sliding prices in the coming days and weeks, it’s important to keep the fundamental strength of stocks in mind. This year has seen some sectors perform exceptionally well, and the major indexes are trading with positive growth when looking at the data since January.
There’s also the outside chance that a new trade deal could be signed, which would almost immediately reinject some optimism into the market.
Sliding prices could create real bargains on strong growth stocks, so investors should be vigilant when watching the market in September.
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