Years in Days

Since President Donald Trump announced new tariffs last Wednesday, global markets and economies have been in chaos.  As of this writing, the tariffs now include a blanket 10-percent duty on all trading partners and up to 145 percent for specific countries like China.  This has caused volatile moves in the markets.  U.S. stock indices, like the Dow Jones Industrial Average, dropped over 2,200 points last Friday and continued to fall on Monday, only to scream higher Wednesday and settle lower yesterday.  There’s no tellin’ how today will unfold.  The S&P 500 is well into correction territory (a loss of between 10 and 19.9 percent from its all-time closing high in February) and potentially closing in on bear market territory (a loss greater than 20 percent).  Asian and European markets have also seen big losses, showing widespread investor worry about the growing trade war.

In response to the U.S. tariffs, China has imposed its own retaliatory tariffs on American goods.  It currently stands at 84 percent and is only further worsening trade relations.  Economists warn that these actions are increasing the probability of a global recession.  In the U.S., the tariffs are expected to increase consumer prices by nearly 2 percent this year according to this article from Yale University’s Budget Lab.  It argues that household purchasing power could be reduced by an average of $3,800 annually.

Those in favor of the tariffs have defended them as necessary to address trade imbalances and bring manufacturing jobs back to the U.S.  Some are endorsing the idea as a bargaining tool.  To their credit, the Trump administration has indicated that between 50 and 70 countries have already reached out to negotiate trade terms. 

While one cannot say for certain how the future will unfold, many economists and business leaders worry tariffs risk destabilizing global supply chains, ultimately hurting consumers. Click here and here for a couple of articles.   The impacts are already affecting industries like steel, aluminum, and automobiles with prices for goods like clothing and textiles expected to rise in the months and quarters ahead.  The coming weeks will be crucial in determining whether these tariffs will achieve their goals or deepen economic instability.  As the situation becomes more fully revealed with time, Atlas will stay abreast of how these policies impact both domestic and international markets, and whether they lead to long-term benefits or further economic challenges.