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Federal Reserve Nervous about Trump Trade War with China
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Summary: Trump’s tariffs on China will go into effect on Friday. 

Early Friday, President Donald Trump’s tariffs on Chinese goods will go into effect, and they are expected to create a trade war between the two powerhouse economies.

  
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The tariffs will begin at 12:01 am in Washington, DC, and they are valued at $34 billion. According to Bloomberg, “The milestone marks a new and damaging phase in a conflict that has roiled markets and cast a shadow over the global growth outlook.”

Chinese officials are expected to fire back at the US immediately. Beijing has stated that they may place retaliatory tariffs on US goods such as soybeans and pork, and this has some American agriculture leaders worried.

Investors are also concerned that this trade war will spread globally. On Thursday, US stocks showed gains, while China’s market dropped.

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“The Standard & Poor’s 500 Index was up 0.3 percent at 11:15 a.m. in New York, after earlier rising as much as 0.6 percent,” Bloomberg said.

Trump said that the US will charge 25% additional duties on Chinese imports that Trump said were theft of American intellectual property. He has been vocal that he wants to punish China for allegedly stealing US technology and not being open to working with US businesses.



In response, China said that it will impose tariffs similar in value.

The news of the tariffs have caused Chinese stocks to falter in recent weeks, and People’s Bank of China Party Chief Guo Shuqing has responded to the public’s fears by saying that bond market risks are controllable and that the economy is stable enough to handle the new tariffs.

On Thursday, the Federal Reserve said that Trump’s tariffs are already hurting US investment.

“Many district contacts expressed concern about the possible adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity,” the Federal Reserve stated at a meeting. “Contacts in some districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.”

According to CNN, the tariffs may have investors worried, but the bankers at the Federal Reserve meeting on Thursday still have trust in Fed Chairman Jerome Powell. They believe he will lift interest rates this year as unemployment declines and inflation stays steady.

As of Friday, Trump will have placed tariffs on aluminum and steel products and has threatened more tariffs to trading partners such as Mexico, Canada, Europe and China. Like China, the other jurisdictions have threatened to create retaliatory tariffs on US goods.

What do you think the new tariffs on Chinese products? Let us know in the comments below.



 

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