So much for the trade war relief rally.
Days after China said they would not retaliate, they retaliated.
All after President Trump followed through with his promise to tack on 15% in tariffs on $110 billion worth of imports. In fact, China responded by rolling out higher tariffs in stages on nearly $75 billion worth of U.S. goods.
“China’s determination to fight against the U.S. economic warmongering has only grown stronger, and its countermeasures more resolute, measured and targeted,” according to the Xinhua News Agency, as quoted by Bloomberg. One thing that “White House tariff men should learn is that the Chinese economy is strong and resilient enough to resist the pressure brought about in the ongoing trade war.”
The Impact is Being Felt Across the U.S.
According to the Congressional Budget Office, the trade war could reduce U.S. GDP by about 0.3% by 2020, and could reduce the average real household by $580. Worse, according to JP Morgan, the latest round of tariffs could increase the average cost per U.S. household to $1,000 a year from $600 just last year.
Retailers will be hit hard, too.
In fact, according to Best Buy CEO Corrie Barry, the trade war will impact televisions, smart watches, headphones, mobile phones, and gaming consoles. Worse, the trade war is making it hard to “predict how consumers will react to higher prices,” she said, as quoted by CBS News.
Dollar Tree even raised its second quarter inventory levels about 15% in a scramble to import more goods from China ahead of higher tariffs. Worse, the latest round of tariffs could cost the company up to $26 million.
Food and agribusiness stocks are taking a hit.
You may remember that China cut off imports of U.S. agricultural products like soybeans and corn, which is hurting U.S. farmers. It’s already led companies like Deere & Co. to cut production by up to 20% in the second half of the year. Del Monte said it was closing U.S. plants and cutting hundreds of jobs thanks to higher costs.
Clothing and Footwear Stocks are in Trouble, too.
Already more than 200 footwear have asked Trump to end the trade war.
Companies including Adidas, Converse, Crocs and Nike joined retailers like Foot Locker and JC Penney in the request. “There is no doubt that tariffs act as hidden taxes paid by American individuals and families,” they said. “It is vitally important that the President knows his new taxes are going to hurt both their employees and families who buy shoes,” said Footwear Distributors and Retailers of America president and CEO Matt Priest.
“Brands have already said tariffs will dent job growth and shoe stores are saying it’s a job killer. We hope the President listens to Americans across the country who are the very people growing our local economies and stops this unnecessary trade war.”
And of course, tech stocks like Apple, Intel, and a host of others could take big hits, too.