What Could Happen
The U.S. imported $539 billion worth in goods from China in 2018. However, we exported $120 billion worth. The U.S. has a lot more to put tariffs on than China does. The Chinese economy is hurting right now while ours is holding strong. We’ve been looking at different research and have been analyzing a lot of things when it comes to the trade wars. Oxford economics research has released a few scenarios so we want to talk about these and discuss what could play out. Scenario one would be that China feels the pain and our current administration starts to think about the 2020 election and a deal will be eventually made over the next few months. Scenario two would be that the current situation of U.S. tariffs last week and China’s tariffs this morning. Tariffs are 25% and are lobbied between the countries. What could happen, economically, is that we could see a 0.5% hit to U.S. GDP, a 1.3% hit to China GDP and then a 0.5% hit to world GDP. Now, if that continued into 2020 that would be the impact on GDP. Scenario 3 is the most extreme scenario and shows 35% tariffs and a 25% auto tariffs. That would show a 2.1% hit the GDP and our country causing a recession in 2020. There would be a 2.5% hit to China’s GDP causing a pretty deep recession for them and then a 1.7% hit to world GDP. This is a lot of noise and we’ll see what plays out but for us here in the U.S., we need to focus on our economy. We’ll get some numbers in on Wednesday of this week on retail sales and a report on Friday will show consumer confidence. We need those to be good to outweigh all the negatives around the trade talk.
China’s Tariff Game
China has come out and said that they’re going to put $60 billion dollars in tariffs on U.S. good starting June 1st. We look at this and wonder if they are just trying to buy time or are they trying to help themselves figure out a strategy to come back? The U.S. economy still very strong and we’re seeing a lot of good data. It’s going to be important over the next couple of weeks to look at business confidence and to see how the consumer reacts to this data. We are curious to see if people are going to be scared off or will the consumer stay strong. Also, we are anxious to see if jobs numbers will continue to grow as well as GDP. Right now, internally, our economy looks strong and we still think we’re in the driver’s seat. We’ll have to wait until June 1st to see if anything changes.
The weather itself is may also be a factor in the trade storms that have been brewing. We’re in the longest 12 month stretch of rain we’ve ever had on U.S. Record. That type of weather can slow up construction, people taking trips, the consumer spending money doing home improvements, and much more. We’re watching jobs growth and the lag on construction because if this rain starts to go away, construction numbers should start to go up which would be good for the economy.
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