The United States and China are getting closer to a full-blown trade war. President Trump imposed new tariffs on about $200 billion of Chinese goods and threatened to add billions more in an attempt to force the country to change its trade practices, which he says, “plainly constitute a grave threat to the long-term health and prosperity of the United Sates economy.” The 10% tax on imports from China take effect today and will rise to 25% at the end of the year.
In response, China canceled trade talks with the U.S. keeping with their pledge that they would not negotiate under threat. Chinese Foreign Ministry spokesman Geng Shuang said, “Nothing the U.S. has done has given any impression of sincerity or goodwill…”
The world’s two largest economies do not appear to have any near-term game plan to resolve their differences. According to the Wall Street Journal, a senior White House official said Friday “there are no meetings on the books right now.”
As we’ve written about in our last two Quarterly Point of View letters this year (link below), we believe a full-blown trade war is something to worry about…