Tariff Fears

The stock market has been extremely volatile this year and the latest fears over a trade war have only aggravated that volatility.   The “market” hates uncertainty and the escalating tough talk from the Trump Administration and the Chinese government are raising concerns over trade with China.  Keep in mind that we import five times as much from China as we export to them.  From that standpoint alone it would appear that we have more to gain from a trade war than does China.  The farm belt is likely to be the biggest loser overall since China imports significant amounts of farm products including soybeans, corn and meat products.  It is also likely to increase consumer prices for products made of steel or aluminum.  By placing tariffs on imported steel and aluminum there will be no “bargains” for industries that use either of these basic materials.  Americans have been on a “sugar high” for decades since imported Chinese products have been cheaper than similar American-made items.  America has consequently lost many of our consumer industries such as textiles and electronics to countries with cheaper labor and production costs.

Steel and aluminum production has been on the decline for several decades.  Cheap imports have created dependence on other countries while our own workers and industrial plants have been increasingly idled.  China (and others) dump steel and aluminum into American markets below cost to keep their own domestic economies growing.  Dependence on foreign suppliers is a threat to our national security.  Steel and aluminum are essential to construction and weapons production.  Both civilian and military uses of these materials are critical both in times of war and peace.  Trade imbalance has been ignored for too long.  If we don’t stop the hemorrhaging of trade imbalance, the patient (American industry) will surely die.  Trump the businessman is negotiating a better deal with China and others who have taken advantage of weak leadership and excessive material consumption by the American public.

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