The Markets Have Spoken: End the Trade War Before Damage Gets Worse

WASHINGTON – Officials from the United States and China are meeting this week for a second round of negotiations as they work toward a deal to end the trade war. The dispute between the two countries has lasted for months and its developments have created turmoil and uncertainty for the stock market. Everyday Americans watch their 401(k) plans tumble when leaders indicate the trade war will continue to drag on. As tariffs continue to hurt American businesses, workers, and families, the message from the markets is clear: the trade war needs to end before things get even worse.

NEW YORK TIMES: Trump ‘Spooking Stock Investors’ with ‘Tariff Man’ warning. “Stocks sank on Tuesday, as President Trump threatened China with further tariffs, just days after the two countries agreed to a cease-fire in their escalating economic conflict. Referring to himself as a ‘Tariff Man,’ Mr. Trump, in a series of tweets, deepened the murkiness surrounding the trade agreement, while members of his economic team talked down the prospects of a broad deal.” (New York Times, 12/4/18)

POLITICO: ‘Trump can’t have his tariffs and the stock market too.’ “President Donald Trump loves two things very much: tariffs and a rising stock market. It’s becoming increasingly clear he can’t have both…After markets soared in 2017, Wall Street hit a wall, with stocks dropping in recent weeks in part on fears that China and the U.S. will not reach an agreement by a March 1 deadline and Trump will slap tariffs as high as 25 percent on everything China exports to the U.S., inviting significant retaliation.” (Politico, 12/19/18)

FORBES: ‘Turmoil in the markets’ when Trump tweets about tariffs. “President Trump and China’s President Xi had dinner on Sunday at the G20 summit. Expectations were low going into it with a large concern that there could be a further deterioration in trade talks, and Trump would then impost 25% tariffs on pretty much all goods imported from China…However, since there was very little concrete agreed to and China didn’t release any official statements until Wednesday (when the U.S. stock markets were closed), Trump’s tweets, which included calling himself ‘Tariff Man,’ helped the Dow Jones crater almost 800 points, or 3.1%, on Tuesday.” (Forbes, 12/6/18)

CBO: Tariffs will slow U.S. economic growth. “Tariffs imposed by the Trump administration will limit growth of U.S. real gross domestic product by an average of 0.1 percent each year for the next 10 years if they remain in place at current levels, the Congressional Budget Office (CBO) said on Monday. The nonpartisan agency said growth of GDP – a measure national economic output – would be curbed by a drop in consumer spending power and a fall in U.S. exports.” (Reuters, 1/28/19)

PANTHEON MACROECONOMICS ECONOMIST: Trade war is ‘quickest possible route to a recession’ with ‘stock markets likely to tank as tariffs hit.’ “Ian Shepherdson, chief economist for Pantheon Macroeconomics, estimated the tariffs would constitute a tax hike of about 0.7 percent of GDP, ‘to say nothing of the cost of the disruption to supply chains.’ … ‘With stocks likely to tank as the tariffs hit, even without higher rates, it seems to us that broad, high tariffs on imports are the quickest possible route to a recession next year.’” (Washington Post, 10/30/18)

CRAMER: ‘Higher tariffs and higher interest rates are setting stocks up for a rough 2019’. “President Donald Trump’s tariffs on China and the Federal Reserve’s plans to hike interest rates in lockstep are both ‘toxic’ for the stock market, and combined, they are souring the prospects for 2019, CNBC’s Jim Cramer warned Monday. ‘Higher rates and higher [tariffs] are setting us up for a very difficult end of the year — not to mention 2019 — unless something’s done to ameliorate these two different houses of pain,’ the ‘Mad Money’ host said. (CNBC, 10/29/18)

  • ‘Mini version of 2008’ could be looming. “The only thing that can stop the market’s recent plunge is the Federal Reserve changing course on interest rates or President Donald Trump ending his tariffs, according to CNBC’s Jim Cramer. ‘My main fear is that we could have a mini version of 2008 if the Fed doesn’t change course,’ the ‘Mad Money’ host said Monday night.” (CNBC, 10/30/18)

TIAA WORLD MARKETS PRESIDENT: Trade developments pose ‘big risk’ for markets. “Investors have feared for most of the year that a protracted trade spat will lead to slower economic growth and diminishing profits for companies. ‘The big risk is still with trade and China,’ said Chris Gaffney, president of world markets at TIAA Bank, noting the market has not fully priced in the possibility of a protracted trade war with China.” (CNBC, 10/31/18)

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