The stock market plunged yesterday amid fears of a renewed and intense trade war with China. After months of the “calm before the storm,” United States equity markets dropped sharply on Tuesday as traders prepared for an escalation of the U.S.-China trade war complete with more tariffs (taxes on the American consumer).
Tariffs are taxes on imported goods and as we’ve repeatedly reported, the “end user” (in this case, the American consumer) pays them in the form of higher costs. Just because you haven’t seen a separate line item on a receipt that says “tariff” doesn’t mean you haven’t been paying for Donald Trump’s ridiculous and economically destructive trade war.
Mainstream media outlets often loathe the trade war, not because it increases costs for the average American or gives the government more power to steal the money of the public, but simply because Donald Trump is starting it. But there are real tangible reasons to oppose the trade war and the suggested 25% tariffs on imported Chinese goods.
According to Business Insider, world equity and oil markets slumped Tuesday and the stock market’s “fear gauge,” known as the VIX, spiked after the US president on Monday threatened to raise tariffs on $200 billion worth of Chinese goods to 25% from 10% and slap new 25% tariffs on $325 billion worth of Chinese goods.
Two of the stocks caught in the crossfire were AMD and Nvidia. Both stocks fell by about 3%, as China is an important gaming market for the chipmakers. Shares in L Brands also slid 5% — the owner of Victoria’s Secret and PINK described China as “an extremely important market” in April. Similarly, Aristan Network fell 4% as the cloud-networking group flagged that US tariffs on Chinese imports could increase its costs and reduce its sales in its latest earnings report. –Business Insider
US Trade Representative Robert Lighthizer confirmed Trump’s threat from a day earlier. On Monday, Lighthizer said that the tariff increase was set to take effect Friday at 12:01 a.m. ET. “One cannot but sense that Mr. Trump is playing us a little,” said Neil Wilson, the chief market analyst for Markets.com. “He may well be making a deal seem further away in order to make the achievement seem all the more impressive when it comes.” Either way, Trump’s political posturing (if that’s what it really was) has been seen in the stock market’s fall.
“Over the course of the last week or so we have seen … an erosion in commitments by China,” Lighthizer told reporters, according to Reuters. “That, in our view, is unacceptable. We’re not breaking off talks at this point,” he added, saying, however, that for now, “come Friday there will be tariffs in place.”
The only way to really protect yourself from tariffs is to decrease consumerism. This is a difficult task for a majority of Americans, as many live off their credit cards and the newest and greatest things. But in order to not pay for Trump’s trade war, you’ll have to stop buying things. But this has the added benefit of helping save money, so if you don’t need the item, it could be a net win for you!
“The underlying message isn’t to stop buying—it’s to remember, always, that the best things in life aren’t things.” – book description; Jon De Graaf, author of Affluenza: How Overconsumption Is Killing Us and How to Fight Back