Q&A of the Day – China Trade War – Hype or Reality?
Each day I’ll feature a listener question that’s been submitted by one of these methods.
Email: brianmudd@iheartmedia.com
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Today’s entry…
We’ve heard the sky is falling before with a China trade war. To me this sounds like another manufactured media crisis. What do you think? More hype?
Bottom Line: Alright today’s the big day. At least if you do buy into the whole China trade war thing.Additional tariffs are rising from 10% to 25% on $200 billion worth of Chinese goods. That’s what this is all about. So, what the heck does that really, mean? I’ll get to it, but I’ll start by walking you back to what’s happened since the “trade war” began. Here’s the short version.
January 22nd, 2018: Trump nails $200 billion worth of Chinese goods with 10% tariffs. Here’s what’s happened since:
S&P 500: +4%
GDP: +3.3% for the past four quarters (up from 2.6% in the prior four quarters)
Unemployment Rate: 3.6% down from 4.2%
Wage Growth: +3.2%
To quickly recap...Since the initial tariffs were in place, the US economic growth rate has accelerated to it best performance in over 14 years, wage growth the best in twelve years and we have the lowest unemployment rate in 49 years. I’d say the “experts” were about as right about the Chinese tariffs as they were about Trump becoming president, the impossibility of the economy growing at 3% ever again and the impact of the tax cuts. Consider the source. You’re right to be skeptical.But what about this round of tariffs?
Here’s the deal. The US economy is currently producing just over $21 trillion per year in output. So, what do these tariffs at $200 billion at 25% represent? 0.9% of the US economy impacted by 25% (assuming China responds in kind). All in, we’re talking about two-tenths of one percent of the US economy being impacted. You’re welcome. That’s what I’m here for... Two sides to stories and one side to facts.