Obama’s meddling again. Now he’s putting tariffs on China’s tires that are coming into the United States. He hasn’t learned that no one benefits from protectionism.
However, Obama’s protectionist ways has China firing back as they consider putting tariffs on the chicken and auto parts that come over into China.
This is not good. Each country could keep upping the ante, causing horror for global trade.
When China was much smaller economically, this could have potentially hurt them more than it does today. However, I have to ask: If two countries both impose tariffs, does it hurt the debt-laden country more or the country with a large surplus? I’d say it would hurt the debt-laden United States more that it would hurt the cash-rich Chinese right now.
So while neither country would benefit from this, China could potentially be hurt much less than the United States.
Therefore, I really think that if Obama sticks to these protectionist ways, that it could really weigh on all of the U.S. financial markets.
For instance, commodities almost always get weighed down when countries impose tariffs due to a temporary fall-off in demand.
Stocks suffer because some companies in China and the United States would be hurt, but the United States would likely feel the brunt of the pain this time around.
Therefore, U.S. stocks would likely be hit far worse than Chinese stocks.
Our U.S. Treasury market could be hurt because why would one of the largest buyers of our Treasuries want to buy up more of them when we’re slapping tariffs on them?
This will even cause a lot of volatility in the currency market as all of these stocks, commodities, bonds suffer.
This could push traders into the defensive assets once again such as gold and the yen.
Therefore, keep an eye out to see how long the United States and China knock heads. The longer they do, the more defensive investors are likely to become across the board.
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