Tariffs & trade wars, what are they good for?
- What are tariffs and trade wars good for? Many economists say: “absolutely nothing.” Escalating trade wars are painful and could harm an economy, but they are not a zero-sum game. To date, the actual tariff amounts currently being imposed are not necessarily exorbitant, but if recent events are an indication of escalating tit-for-tat policies, that would be concerning.
- Last week, U.S. President Donald Trump announced a 25% tariff on up to $50 billion worth of goods from China. These goods range from dishwashers to aircraft tires. Similar tariffs are being imposed on Canada, Mexico, and other trading partners within the European Union as well. This week, the administration is threatening to target another $200 billion of Chinese goods. This puts the U.S. and some of its largest trading partners at odds with each other, to put it mildly.
- But what exactly is a trade war? What are tariffs and quotas and trade deficits? Most importantly, how will all of this affect investors? We explore those questions and more in this week’s Thought for the Week.