While Trump continues to threaten tariffs, especially against China, the actual impact on the US market might be less severe than anticipated. The article explores several factors mitigating the potential economic fallout, including declining Chinese exports to the US, China's weakening economy, the shifting of supply chains away from China, and the overall resilience of the US economy.
Yet, amid growing but by no means market-altering uncertainty about the latter pledge, The Washington Post ran a story Jan. 6 indicating that new tariffs might be much narrower than Trump promised on the stump. The story indicated they would probably be limited to a few key areas: the defense industrial supply chain, critical medical supplies and energy production.
Of course, the ultimate extent of new tariffs on China this year is as difficult to predict as the mercurial incoming president. Goldman Sachs has projected a 20% increase. A surfeit of goods production in China. As the Chinese government wants to keep workers working, its manufacturers are producing more goods than it can consume, which will mean lower prices in the U.S., inevitably declining export volume, fewer goods on which to impose tariffs, lower net costs from tariffs for American consumers — and less economic and market impact.
Further, U.S. stock market impacts from potential new tariffs on nations other than China may not be as great as many investors may fear.It’s critical to distinguish market from overall economic impacts; the two shouldn’t be conflated. The U.S. economy is a net importer, as it imports more than it exports . But theis a net exporter.
Even the characteristically bullish Yardeni sees new tariffs as a potential cause for market concern—for now. But he believes the market impacts would ultimately be offset by the remarkable current strength of the U.S. economy and the robust corporate earnings that are widely forecast.Bloomberg reported Jan. 14 that Trump’s advisors are considering a gradual approach to tariffs rather than the rapid pace Trump indicated during his campaign.
TARIFFS CHINA TRADE ECONOMY MARKET IMPACT
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