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October 2, 2019

What Trade War Are They Talking About?

If I believe the media a recession is imminent because of a global trade war.  Ooops. Global Trade has never been better balanced and more free. Trade war not in effect is the truth. Our top 4 trading partners are in order – Mexico, Canada, China and Japan.  

First, the current Administration put tariffs on goods from each of these countries and has since rescinded them as negotiated trade deals are now in place with three of the four. The total of these three countries combined swamp the size of our trade with China.   

Fact 1. Yes, Smoot Hawley was a critical component of the Great Depression. That Act was a 30% tariff on all global imports and only one country has tariffs in place now – China. The impact on the China economy is clear as per our recent post  ” How’s that China Trade…uhhh…Tariff deal going?” More to come on that.  

Fact 2. Companies are moving rather than sitting quietly and getting hammered by tariffs. For example; Home Depot buys 2 billion in  goods from China. Since the tariffs were announced 1 billion of their manufacturing has moved to to other regions – a 50% reduction in tariff impact on the US and a 50% hammer on China.   

Turns out that a trade war taking down the global economy is not happening. The media’s conventional wisdom is once again – not wise.

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