Actual Tariff Implementation Continues to Threaten US Market


We had a rough week on Wall Street – today, U.S. stock index behaviors are not good – SP500 and DJIA continue to drop.

First, markets dropped significantly after President Trump tweeted about initiating new tariffs on Chinese goods Sunday night.

After recovering somewhat, the markets tanked again when officials like US Treasury Secretary Stephen Mnuchin confirmed that the president’s tweets were possibly becoming actual policy.

This week, Chinese delegates are in the process of meeting with Americans to try to hash out solutions to a US/China trade problem that has led to a lot of investor fear and uncertainty.

This morning, we see the S&P 500 and Dow Jones Industrial Average falling further after reporters confirmed that the president has actually raised tariffs on additional Chinese imports.

“Early Friday, the administration raised tariffs to 25 percent from 10 percent on Chinese imports that are worth about $200 billion a year,” write Alexandra Stevenson and Matt Phillips in the New York Times this morning. “President Trump said the increase came in response to Chinese officials attempting to “renegotiate” a pact aimed at calling a truce in the trade war. China said it would respond with unspecified countermeasures. Mr. Trump also said on Twitter that ‘there is absolutely no need to rush’ on a trade deal, dampening hopes that an agreement would be reached quickly.”

Results on the markets are hair-raising to many short-term traders – unless they’re taking market short positions!

“Yields on the 10-year Treasury note declined again, suggesting investors continued to move money into the safety of government bonds,” Stevenson and Phillips add. “The yield on the 10-year note hovered around 2.43 percent in morning trading. Prices for soybeans, a top American export to China, slipped again and hovered near their lowest levels of the last decade.”

Some global markets seem to have sustained the damage, but the question is how these punitive measures will affect not only the stock market, but trade in the real world.

American farmers have been some of those heaviest hit by retaliatory tariff activity.

“Six economists in the Agriculture Department’s (USDA) research branch quit the Trump administration in a single day late last month and more are reportedly planning to leave,” reported Brooke Seipel in The Hill May 7. “The exodus comes after the Economic Research Service (ERS) published findings that painted the new Republican tax law, Trump’s trade disputes and other policy decisions as hurting American farmers financially. A recent report shows a drop in farmers’ income by about 50 percent since 2013, and says slightly more than half of farm households have faced negative farm income in recent years, forcing them to rely on other sources of income to support their families.”

Manufacturing, though, is not immune, either.

“The tariff announcement helped send a measure of raw-material prices paid to an almost seven-year high in March, the Institute for Supply Management’s manufacturing survey showed Monday,” wrote Bloomberg analysts April 3 on a prior round of trade threats. “That led in turn to panic buying, pushing prices higher still, with some suppliers completely selling out, according to some of the survey’s contributors. About 32 per cent of the respondents’ comments related to the threat of duties, ranging from the potential for higher costs to concern about limited availability around production schedules, according to Timothy Fiore, chairman of the group’s factory survey committee.”

More to come – STAY TUNED!