It has been a long, long 18 months since President Donald Trump fired the first shot in a trade war with China. What considered a dispute with no end in sight, it now looks to be winding down (or is it?) after both sides are making concessions. But it has been rough for all parties involved.
President Trump started to set tariffs, and other trade barriers on China with the aim of forcing it to make changes to what the United States has been saying are “unfair trade practices.” Initially, President Trump imposed 10 percent tariffs on $300 billion of Chinese goods. China retaliated by lowering its currency below the crucial 7 threshold, making its goods even cheaper.
This tit-for-tat lasted for more than a year and has triggered many negative repercussions for Beijing and Washington. While the U.S. initially weathered the storm, there are obvious signs that this trade war has been having a major effect on the American economy.
Here are 10 ways the U.S.-China trade spat has affected the U.S. economy:
1. Stock Market Turmoil
For the past year, the U.S. stock market has been quite volatile, and U.S. stocks have seen major nosedives. The Dow Industrial Average and Wall Street have also fallen several times over the past few months. The turbulence in the stock market has created fears among the general population and investments have dropped. What this means is that investors will earn less and invest less. More importantly, because of the decreased return on investments, this will also affect the value of retirement accounts and workers 401(k) plans.
2. Impact on Agriculture
For the past 30 years, American farmers had been selling soybeans, corn, maize, and pork to the Chinese. This earned American farmers billions every year. Now with the trade dispute, China has slowed down or decreased the buying of agriculture and farm products from American farmers. And this is beginning to show. Thousands of farmers, especially in the Midwest, have been affected by the trade dispute. Many are on the verge of bankruptcy because they do not have an alternative market for their products. What was once a $20 billion dollar agricultural trade with China is now down to about $1 billion.
For now, the U.S. government has been using federal funds, to the tune of $28 billion, to help the farmers fight bankruptcies or find other markets, but no one knows how long this can continue.
3. Lower Interest Rates
To enable Americans to buy homes, cars, and other large items, the increased tariffs have led to lower interest rates to stimulate consumer spending and limit more damage to the economy. But this is a two-way street; with low-interest rates, it is likely that Americans will borrow more and remain in perpetual debt if the trade issues are not resolved. Worse, for people who have saved their hard-earned money, this will also result in a marked decrease in interest earned on their savings.
4. A Drop in Imports
Since this trade with China began, the United States has seen a 4.5% decline in imports, the largest decline in real imports of goods and services.
5. Sluggish Job Growth
The manufacturing sector is facing greater challenges in the midst of the U.S.-China trade war. Hiring has declined, and job growth has slowed down. This is mainly due to uncertainty about the future. American manufacturers have reduced their capital investments and delayed mass hiring because of the uncertainty in the trade talks
6. Price Inflation
Everything is now more expensive: The majority of items in American homes are manufactured in China. Now with the tariffs, almost every item has added costs. Experts indicate that most American families will see an increase in their household budget from $500 to $1,000 each year for small items like utensils, clocks, linen, and toys. However, for the big-ticket items like smartphones, televisions, personal computers, refrigerators, and microwaves, the extra cost will probably range anywhere from $1,000-$3,000 per year.
7. A Dip in Savings
Because of the tariffs, almost everything in the United States will be more expensive, and at the end of the day, the average American will definitely see a decrease in their savings.
8. Rising Debt Levels
Because of the need to spend more money to buy necessary items, some families may face an increase in debt, coupled with significantly lower spending power. This is unfortunate since most American families are already under too much debt, and the rising cost of living will only increase this further.
9. Diminishing Investor Confidence
The public no longer has confidence in the market because of its volatility, which will continue until the Chinese and Americans settle their trade differences.
10. Falling Investment
Because of the ongoing trade war and volatile market, many businesses may hold of expanding, hiring, or investing in new projects. This, in turn, can lead to a slow growth rate, which means that people who do not have jobs will spend less.
Out of Bullets?
So far, the American economy has proven resilient to the trade issues with China. The nation has the lowest unemployment on record, and the durable or domestic market is thriving. President Trump keeps on saying that the U.S. is doing great despite the trade differences, but the real hardships are being faced at the consumer level. It might be true that someone had to confront China with its unilateral trade practice, theft of American innovations and manipulating their currency; but unfortunately, it is the average American who is faced with the burden of dealing with tariffs and the tension between the two nations.
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