The market was spooked on Thursday after President Trump’s surprise announcement that he would be imposing 10% tariffs on $300 billion worth of Chinese goods on September 1st.
The Dow Jones Industrial Average traded 300 points lower after being up as high as 311 points earlier in the day. The S&P 500 was down 1.1%. The Nasdaq Composite traded down 1.1%
Trump’s announcement came as a surprise because there had appeared to be a ceasefire in the trade war.
Last month, President Trump and Chinese leader Xi Jinping met on the sidelines of the G20 Summit in Osaka, Japan.
The leaders of the world’s two largest economies were unable to reach an agreement to prevent an escalating trade war. However, they did ultimately declare a ceasefire. Both leaders agreed to refrain from placing additional tariffs on the other country’s products, and President Trump said he would allow American companies to conduct business with controversial Chinese company Huawei.
Then the news broke earlier today that Trump had changed course and was threatening to impose more tariffs on Chinese goods.
Trump tweeted, “the U.S. will start, on September 1st, putting a small additional tariff of 10% on the remaining 300 billion dollars of goods and products coming from China into our country. This does not include the 250 billion dollars already tariffed at 25%”
CNBC reported that “Trump’s tweets came after a U.S. delegation met with Chinese trade officials earlier this week. Those were the first in-person trade talks between China and the U.S. since both countries reached a truce on the situation.”
The BBC reported, “he also criticized China for not honoring promises to buy more US agricultural products and attacked Chinese President Xi Jinping for failing to do more to stem sales of the synthetic opioid fentanyl.
In later remarks, the President told reports the 10% tariff was a short-term measure and that tariffs could be lifted further in stages to more than 25%.
“Somebody should have done this with China a long time ago,” he added.
The new levy is likely to affect a wide range of goods, from smartphones to children’s clothing.”
There is no doubt that the trade war is harming the economy of both countries.
However, the real question is, it worth it?
President Trump thinks so.
Trump understands that China is arguably the biggest foreign threat to the United States, and he has recognized this for years. The tariffs he has placed on China are meant to bring them back to the table and to stop them from stealing our intellectual property and breaking trade agreements.
China is in this for the long game. They have become increasingly aggressive in making global moves. They are building islands in the South Pacific, they are gaining footholds on multiple continents—including Africa—and they are increasing the size of their military as well as producing more weapons and warships.
Time will tell if Trump’s strategy will work.
However, for one day, the markets showed their displeasure towards his new round of tariffs.