The U.S. Import Tax Cuts Off Immigrants During the First Three-Term President Donald Trump’s Trade War
Europe and Asia’s shares fell while U.S. futures fell as President Donald Trump increased tariffs on imported goods from the world.
Around midday Thursday, the Dow Jones Industrial Average had tumbled over 1,200 points, or 3%. The broader S&P 500 index sank 4% and the tech-heavy Nasdaq index dropped nearly 5%.
The result is a 34% tax on imports from China and a 46% tax on imports from Vietnam. Many factories moved from China to Vietnam to escape Trump’s earlier tariffs.
Economists warn the new taxes will result in higher prices and slower growth in the United States, while likely pushing many other countries into recession.
The U.S. import tax went up by nine-fold last year. The size and scope of the levies, announced after the U.S. stock market closed on Wednesday, took many investors by surprise.
“This is a game changer, not only for the U.S. economy but or the global economy,” Olu Sonola of Fitch Ratings wrote in a research note “You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.”
In his first term as President, Trump tried to build a wall against illegal immigrants, but he is now trying to restrict global trade in an effort to promote domestic manufacturing.
“We’re going to produce the cars and ships, chips, airplanes, minerals and medicines that we need right here in America,” Trump said Wednesday in the White House Rose Garden. “They’re all coming back to our country because if they don’t, they’ve got a big tax to pay.”
Domestic manufacturers are supposed to be the biggest winners of the trade war, but many factories are worried about higher costs and a loss of export markets. The United States’ trading partners have promised to retaliate with tariffs of their own.
“Here it comes and we’re already seeing that,” said Tim Fiore, who conducts a monthly survey of factory managers for the Institute for Supply Management. The retaliatory tariffs are going to be very ugly. It is going to kill demand.
The U.S. launched a trade war in the 1930s. It did not end well. The notorious Smoot-Hawley tariffs are widely thought to have worsened the Great Depression.
It meant higher prices for consumers, says Larry Summers, former Treasury Secretary. It meant higher input costs for producers. And it was bad for peace, because it undermined comity among nations.”
Economists say Trump’s new tariffs are even more draconian, hitting even products the U.S. is unable to produce domestically, such as coffee and bananas.
Stock Markets Fall Following U.S. Announcement of Global Tariffs: Chinese Implications on the SET, S&P 500, and Asia/Europe
The yield on the 10-year Treasury fell as low as 4.11% in the morning from 4.17% on Tuesday and from 4.80% early this year. It later went up to 4.18%. Higher yields can show higher expectations for the economy.
In other dealings early Thursday, U.S. benchmark crude shed $2.63 to $69.08 per barrel. Brent crude, the international standard, gave up $2.62 to $72.33 per barrel.
The S&P 500 rose 0.7% to 5,670.97 after careening between an earlier loss of 1.1% and a later gain of 1.1%. It’s had a pattern this week of opening with sharp drops only to finish the day higher.
Bangkok’s SET shed 1.1% after Thailand was assigned at 36% tariff on its exports to the U.S. According to a report, it is possible that Thai exports could fall by $7 billion to $8 billion, or 2% of the total.
The announcement came as a “major shock,” Yeap Junrong of IG said in a commentary. “China, in particular, was hit with an additional 34% tariff, bringing its total tariff burden to 64% when accounting for previous measures.”
Source: Markets in Asia and Europe fall following U.S. announcement of global tariffs
The S&P 500 and IB Average as a Crash Proof of the Implications of the High-Yang-Mills Rates
The central bank’s raising interest rates as a result of the tariffs on Japanese exports dashed expectations that the rate wouldn’t go up even more. Mizuho Financial Group skidded 8%.
The future of the S&P 500 was down by over 3% and the future for the IB Average was down by over 2% when the U.S. markets are closed on Thursday.