All quiet on the US-China trade front since December... Then this weekend happened. Yesterday, Trump announced two fresh trade war attacks:
- $200B: The president is increasing the tax we impose on $200B worth of annual imports from China from 10% to 25% this Friday.
- $325B: The rest of the Made in China stuff we import is currently excluded. But Trump tweet-warned that all that would get punished too "shortly, at a rate of 25%."
Quick reminder: Tariffs hurt importers, exporters, and everyone else...
- Corporate winners: Made in USA companies that compete with foreign firms for sales to Americans. With tariffs, Whirlpool washing machines snag an advantage because Chinese rivals become more expensive.
- Corporate losers: American companies that export to China (think Caterpillar's big rigs) suffer from China's retaliatory tariffs. And US companies that import raw materials like steel (like Ford) have to pay for steel + US tariffs now.
- The next possible loser: Most Apple products are assembeled in China, but fall into the "not tariffed yet" category. Trump's threatened expansion would include your whole drawer of iPhones, Macs, and AirPods.
- Everyone else (losers): You and us. US consumers pay for tariffs through higher prices on what's imported from China. Picture a "25% off" sale, but in reverse.
You thought trade spring was coming?... Bam. It's winter again. One reason this update hurts is because investors were expecting a peace deal this week, based on signals from DC and Beijing — It's a key reason markets are at a record high. Now investors have to re-calculate how continued trade war pain will affect company profits.
- Up next: A top Chinese trade negotiator was supposed to visit DC on Wednesday. Now he may cancel...
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