MARKETS MELTDOWN ON TARIFF TALK. More Tariffs for China? By Todd Horwitz, Bubba Trading.

 

President Trump, frustrated by increasingly fruitless negotiations with China, said Thursday that the United States would impose a 10 percent tariff on an additional $300 billion worth of Chinese imports next month, a significant escalation in a trade war that has dragged on for more than a year.

The new tariff would come on top of the 25 percent levy that Mr. Trump has already imposed on $250 billion worth of Chinese imports, resulting in the United States taxing nearly everything China sends to the United States, from iPhones to New Balance sneakers to children’s books.

Mr. Trump had agreed in June not to impose more tariffs after meeting with the Chinese president, Xi Jinping, and agreeing to restart trade talks. But Mr. Trump said he was moving ahead with the levies as of Sept. 1 as punishment for China’s failure to live up to its commitments, including buying more American agricultural products and stemming the flow of fentanyl into the United States. “Until such time as there is a deal, we’ll be taxing them,” Mr. Trump told reporters on the White House lawn.

“The direct impact of these tariffs is smaller than a bread box,” said Bill Adams, senior economist at PNC. “The larger effect is going to be through confidence channels and the effect on capital spending.

“Indeed, if business surveys have been clear about anything it’s that American business is nervous about trade. The closely watched Institute of Supply Management manufacturing survey dipped again in July and is teetering on contraction territory, while the Federal Reserve’s key manufacturing gauge has fallen for consecutive quarters.

Morgan Stanley strategists said the latest round of tariffs, if implemented, would contribute to “slowbalization,” or a continuation of lackluster growth, and could hasten a U.S. recession in as soon as three quarters. “One key reason: about 68% of the next goods tariffed will be consumer goods and autos/parts, with more potential for immediate impact to the economy,” Morgan Stanley strategist Michael Zezas said in a note.

Todd “Bubba” Horwitz

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Financial Markets and Political Commentary
 

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Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.