Will There Be A US vs. China Trade War in 2018?
Source: https://www.bing.com
No there will not be! Yes, I said it- there will NOT be a US vs. China Trade War. Recent US tariffs on China’s steel imports, has sparked fears of an escalating trade war between the two countries.
This is just fear; that is all. It is “facts” and not “fear” that will ultimately drives the markets in the end- although there may be corrections or booms along the way.
Next, I'll give you the top 3 reasons that there will not be a trade war between the US and China.
Top-3 Reasons a US-China Trade War Will Not Happen
Source: https://www.bing.com
A Trade War would hurt both economies: If a true all-out trade war were to erupt, it would hurt both nations significantly. The US & China have become very big trading partners over the last 30 years & any trade war adversely affects both nations' economies.
US-China Trade Imbalance: a drastic shift over the last couple decades, results in the US-China Trade deficit ballooning to over $400 billion annually in China’s favor. China wants this to continue, so they'll agree to trade negotiations.
Both US & China benefit from trade: the US & China benefits greatly from trade. US consumers benefit by low prices for Chinese manufacturing- making US household’s budgets go farther. China benefits from US agriculture, oil and natural gas & other raw materials to make products for the US. If there was no US demand for these Chinese goods- then there would be no supply.
What Is The Chance Of A Trade War?
The actual chance of a US-China trade war is slim; the fears of a US vs. China “trade war” seem to be way overblown. The actual tariffs imposed by the two nations, is a tiny fraction of the total products exchanged between the two trading partners. Looking at the amount of tariffs levied on both sides, there are already many tariffs by both sides on various products.
Tariffs have existed on foreign products for as long as the US has been a country. Tariffs are nothing new- the US used to rely on tariffs almost exclusively for all of its revenue before their was an income tax. Many countries use tariffs to protect their industries from competition.
The US markets reacted positively on news of proposed US-China Trade talks on Monday.
On March 26, 2018- US Markets are all up on the prospects of China-US Trade Talks. The broad equities markets reacted positively to news of potential China and US Trade talks to discuss the US-China trade imbalance. The overall market was up sharply & the US Dow Jones Index (30 Large Cap US Stocks) was up over 600 points, on March 26th.
Ultimately, I believe there will be no US-China Trade War- there is just too much to be lost from such an event occuring.
Thankfully, for both sides, it seems that positive messages are increasing the prospect for bilateral trade talks.
It is important that the US and China meet and talk about the trading situation between the two nations.
Any efforts to help reduce the US trade deficit is a step in the right direction.