When a country the size and power of USA starts imposing tariffs on its trade partners then the world markets take note.
A common reaction is that the trade partner also tries to impose counter tariffs.
A situation like this would hurt the US economy as well.
On one side when you impose a tariff on the things that you are importing into the country then they automatically get expensive.
If things on the shelves get expensive it triggers inflation. USA is already experiencing the pain of inflation since the covid 19 pandemic and its citizens would very much like to be spared from the pressures of increased inflation.
On the export front too the domestic importers would find it difficult to export to a territory which has imposed a higher counter duty in place.
stock market feel the pain
All this news of tariffs being imposed has caused a lot of blood bath in the stock markets.
In the context of the US stock markets the news brought in a crash and this means US citizens who had invested in the American markets saw their portfolios dented and for those whose stop losses got triggered causing the notional losses to be converted into real declines in their investment valuations.
The business world can sense the uncertainty
A ripple effect of the news has been how markets around the world have reacted. A lot of Asian markets have witnessed a crash or a near crash situation as a response to the tariff news.
Can the tariffs trigger something more drastic
If USA imposes tariffs on so many countries then one possibility is that they may collectively align into a possible group and may end up joining BRICS.
At this point this may be a long shot and only a theoretical possibility.
This could further threaten the dominance of USA on the world stage and the importance of the US dollar.
The whole world gets to feel the heat
We have seen how any global event be it the covid 19 pandemic or the geopolitical situation due to the war in Europe or any other part of the world can cause even the unrelated nations to suffer due to shortages of supplies or price rises and inflation that is beyond their control.
The poor and developing economies feel the pain to the max as they are already suffering the effects of the pandemic on their economies.
The global tariff imposition would only make things more difficult for so many small economies.
Even the crypto market has felt the tremors
With so much turbulence in the business world the crypto markets too have seen a significant amount of correction.
BTC the leader of all crypto, has corrected significantly and this has caused a lot of people to sell their crypto.
Interestingly for all crypto holders this is a good time to review their portfolio.
Time to give a hard look at the crypto portfolio
The crypto markets are very volatile and this makes crypto a high risk and reward asset class. If one were to study the portfolio then a lot of people may find that their holding values in crypto are down as much as 70-80% as compared to what it was not so long ago.
A big reason for this is because of the asset allocation they may have done in their portfolios.
Altcoins and memes have been down significantly and crypto with significantly more visibility like BTC, ETH are relatively in a position that can be seen as a healthy correction.
The rebound would happen
Once the markets rebound BTC would be the leader of the pack in leading in the recovery process.
The experience leaves some important lessons to be learnt and that is to give BTC a major allocation of the portfolio and allocate only a much lesser percentage allocation to high risk assets like meme coins.
We could all do without these tariffs
The world economy needs a chance to breathe and thrive and surely not having tariffs and counter tariffs could be a step in that direction.
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