http://profitableinvestingtips.com/profitable-investing-tips/what-happens-to-your-investments-if-the-trade-war-becomes-permanent
What Happens to Your Investments if the Trade War Becomes Permanent?
What is going to happen with US Chinese tariffs? The consensus of the stock market seems to be that an amicable agreement will be reached and all will be well. That may not be the case. What happens to your investments if the trade war becomes permanent? We are not the only ones to be concerned. CNBC reports that Moody’s believes the stock market is getting it wrong and that the trade war could be prolonged and cause lasting damage to the world economy. So far the USA has put tariffs on $200 Billion in Chinese goods and the Chinese have put tariffs on $60 Billion in US goods.
“It’s a very modest response,” said Edward Alden, a senior fellow at the Council on Foreign Relations, of China’s reaction. “There’s no question China’s hurting and they may want to negotiate. The problem is the Trump administration may be overplaying its hand. The harder they push, they may push the Chinese into a corner where politically and for just reasons of saving face, they can’t negotiate with the administration, and secondly the administration hasn’t established a negotiating process. There’s a real divide between the trade hawks and doves.”
Moody’s is predicting that US growth will slow to 2.3% next year and China’s to 6.4%. Why is this happening and why is there a danger of a prolonged trade war and diminution of the global economy?
6. CNBC reports that Moody’s believes
the stock market is getting it
wrong and that the trade war could
be prolonged and cause lasting
damage to the world economy.
7. So far the USA has put tariffs on $200
Billion in Chinese goods and the
Chinese have put tariffs on $60 Billion
in US goods.
8. “It’s a very modest response,” said
Edward Alden, a senior fellow at
the Council on Foreign Relations, of
China’s reaction.
10. The problem is the Trump
administration may be overplaying
its hand.
11. The harder they push, they may push
the Chinese into a corner where
politically and for just reasons of
saving face, they can’t negotiate with
the administration, and secondly the
administration hasn’t established a
negotiating process.
12. There’s a real divide between the
trade hawks and doves.”
13. Moody’s is predicting that US
growth will slow to 2.3% next year
and China’s to 6.4%.
14. Why is this happening and why is there
a danger of a prolonged trade war and
diminution of the global economy?
15. The Rise and Predictable
Slow Decline of US Economic
Power
16. The USA became the dominant
global power at the end of World
War II.
17. War had ravaged Europe and Asia. In
the years after the war Japan and
Germany rose from the ashes of defeat
to become major manufacturing and
global powers.
20. The USSR rose and fell to be
followed by the rise of the Russian
Federation as a dominant producer
of raw materials, especially oil and
natural gas.
21. As Europe, Asia, and other parts of the
world gained economic ground they cut
into the dominance of American
industry and even science.
22. This would have been easy to
predict given that another global
war did not occur.
26. Trump is under pressure to “get a
better deal” for his constituents
and is not known for backing off.
27. And, even when Trump is no longer in
office, US leaders will need to address
the trade imbalance with China in order
to preserve a strong US economy,
manufacturing base, and defense.
31. When the Communists defeated the
Nationalists in the late 1940’s they
became an enemy of the USA.
32. And, the USA developed alliances that
ringed in both the USSR and China.
33. China was an isolated nation with a
huge army and nuclear missiles.
34. In the 1970’s US President Nixon
decided that bringing China into
the community of nations was a
better idea than leaving them as a
dangerous outsider.
35. The Nixon visit to China led to opening
up of the world to Chinese
manufacturing and a huge amount of
investment in China.
36. The result has been that China is
the largest exporter in the world
and has a trillion dollar foreign
currency reserve.
37. AND, the Chinese have a trade surplus
with the USA in the hundreds of billions
of dollars each and every year.
38. China does not want to go back to
its period of isolation and has
global ambitions as seen in its Silk
Road project to create rail and sea
links to markets across Eurasia.
39. China needs to sell it products to the
world in order to further its global
ambitions.
40. There will be a level of tariffs and
loss of markets that China will not
be able to agree to in their
leadership wants to maintain
control of the country.
46. Then, companies in developed
economies like Europe, North America,
and even Japan outsourced their
“easier” work to countries like China to
get the work done for less.
47. And, by outsourcing they bypassed
labor issues and did not need to
buy health insurance or pay
pensions for those foreign workers.
48. The net results was fewer jobs in the
American Industrial Heartland and in
similar areas in Japan and Europe.
55. People are making less money and for
the first time in American history do
not believe that the country is getting
better or that their lives will get better.
56. So, What Happens to Your
Investments if the Trade
War Becomes Permanent?
57. Both the USA and China see the
trade war as “zero sum” game.
58. A zero sum game is a situation in
which the losses by one side are the
gains of another and vice versa.
59. China sees is place in the world as
the dominant global economic and
political power, which are positions
now held by the USA.
60. The USA sees itself as maintaining its
place in the world and is justifiably
fearful of a world controlled by China.
61. There may be a point at which
neither side will back off of its
demands.