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Members of D.A. Davidson & Co.

Trade War Hysterics

"Since hitting new all-time highs two weeks ago, the S&P 500 has fallen about 2.2% as trade negotiations with China hit a snag. Last week, the US announced new tariffs on Chinese imports. This morning, China announced new tariffs on some US goods. 


...It's true tariff increases will not help the US economy. But $100 billion of tariffs spread over $14 trillion of consumer spending is not a recession inducing drag.  


…Last year we exported $180 billion in goods and services to China, which is 0.9% of our GDP. Meanwhile, China exported $559 billion to the US, which is 4.6% of their economy. 


…An extended US-China trade battle means US companies will shift supply chains out of China and toward places like Singapore, Vietnam, Mexico, or "Made in the USA." 


...Anyone can invent a scenario where some sort of Smoot-Hawley-like global trade war happens. Realistically, though, that appears very unlikely." 


(Trade War Hysterics dated 5/13/2019 by Brian Wesbury, Chief Economist, and Robert Stein, CFA & Deputy Chief Economist, with First Trust Advisors LP)


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