Trade war traumatizes traders
The recent tariffs have certainly lowered investor confidence, but the recent ambiguity over a potential block on China’s investments in US tech firms really worried investors.
Recent reports have shown that President Trump will block Chinese companies from acquiring US technology firms and also restrain American companies from selling their tech to China. And although a trade official recently stated that these would likely not be as serious as one might think, investors are still growing apprehensive.
Weary investors sold their stocks rapidly, which dropped the Dow 500 points on Monday – by the end of the day, it recovered a bit but still fell 1.3% overall. And the Dow isn’t the only victim of trade war discussions – the S&P fell 1.4%, the Russell 2000 dipped 1.7%, and the Nasdaq dropped 2.1%.
Initially, investors believed that these negotiating tactics were just a ploy by President Trump to show American confidence and gain the respect of China. However, neither side has shown any signs of giving in anytime soon, as both countries have responded to tariffs with a tit-for-tat approach.
Plus, the tariffs affect more than just exports to China. Further, the European Union now has a 31% tariff on many US imports in retaliation to the US’s same measures. According to Harley-Davidson, this will increase the cost of motorcycles exported to Europe by $2,200 per motorcycle!
Additionally, aside from businesses, a trade war will impact the global economy. GDP’s will slide in many countries as costs rise and trade slows. Thus, if President Trump and China continue to butt heads and fail to reach any kind of diplomatic decision, it could send a shockwave to the rest of the global economy.
Featured image via Flickr/Gage Skidmore