Trade War in Partial Effect

China struck back Monday by hiking tariffs on $60 billion worth of imported American goods. Over 4,000 items are affected, most of which will carry tariffs of 25%, up from 10%.

Items include cotton, machinery, grains, and aircraft parts.

The Dow fell by more than 600 points(-2.38%) in response. The S&P was down 2.41% and the Nasdaq was the hardest hit, down almost 270 points(-3.41%).

China may be out of bullets, they’ve already hit a majority of American exports. Unfortunately our tariffs are also doing damage to US company earnings. Apple partially blamed the trade war for a revenue decline in the first three months of 2019, and construction company Caterpillar said that Chinese tariffs cost it more than $100 million in 2018.

The fact that China has little retaliation ability may embolden US regulators to keep the pressure on, which may be good in the long run, but will definitely cause near term pressure on stocks and the economy.

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