Download the Schwab app from iTunes®Get the AppClose

Schwab Stock Market Report

Click to show the transcript

MIKE TOWNSEND:  Trade tensions have escalated significantly recently, with the United States now engaged in trade disputes with Canada, the European Union, Mexico, and perhaps, most significantly, China.  Let’s take a closer look at the largest potential impact, China.

The Trump Administration announced in June that it would impose $50 billion in tariffs on Chinese imports. Those will go into effect in two tranches.  The first $34 billion in tariffs will take effect in July and will affect mostly industrial products in areas like aerospace and robotics. The second tranche of $16 billion will take effect later this summer. China has responded in kind, and that has led to a tit for tat exchange that now has the Administration looking at an additional $200 billion in tariffs on Chinese imports, but I think it’s important for investors to understand just how long this process takes.

The Administration needs to develop a list of actual products that will be impacted by the tariffs, and that list needs to be vetted publicly, with the business community given a chance to respond and pushback, asking for certain items to be taken off the list. That process, alone, could take a couple of months.

There’s another factor at play here, too. The first set of tariffs didn’t really affect products that ordinary consumers buy, but this larger set is very likely to affect things like cell phones, televisions, clothing, toys.  People will start to feel the impact in the prices that they pay, and if that happens in the fall right before the midterm elections, that could affect who they vote for in the ballot box.

Finally, one other thing to keep in mind: Trade disputes are among the least partisan issues on Capitol Hill. What’s more important to a member of Congress is how the trade dispute affects their constituents, and, particularly, the companies in their district or state. If you’re a member of Congress and your largest employer is negatively impacted by these tariffs, that’s going to really color how you view this issue. So far on Capitol Hill, reaction has been relatively muted.

Right now, there hasn’t been a real organized opposition, but as political pressure increases in the weeks ahead, that could change that dynamic.  Look for behind the scene negotiations to take place over the next several weeks and months, as both sides, China, US, and their disputes with Canada, Mexico, and the European Union try to come to a resolution that averts an all-out trade war, and that’s a resolution that the markets would like to see.

If you’d like to keep up with future Stock Market Reports, just click the subscribe button below.

Schwab has tools to help you mentally prepare for trading

Learn more >

Talk trading with a Schwab specialist anytime.
Call 888-245-6864
M-F, 8:30am - 9:00pm EST

Get 500 Commission-Free Online Equity and Options Trades for Two Years

Learn More >

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.

Please note that this content was created as of the specific date indicated and reflects the author’s views as of that date. It will be kept solely for historical purposes, and the author’s opinions may change, without notice, in reaction to shifting economic, market, business, and other conditions.

Past performance is no guarantee of future results and the opinions presented cannot be viewed as an indicator of future performance.

The policy analysis provided by the Charles Schwab & Co., Inc., does not constitute and should not be interpreted as an endorsement of any political party

©2018 Charles Schwab & Co., Inc. (“Schwab”). All rights reserved. Member SIPC (0718-8JN1).


Thumbs up / down votes are submitted voluntarily by readers and are not meant to suggest the future performance or suitability of any account type, product or service for any particular reader and may not be representative of the experience of other readers. When displayed, thumbs up / down vote counts represent whether people found the content helpful or not helpful and are not intended as a testimonial. Any written feedback or comments collected on this page will not be published. Charles Schwab & Co., Inc. may in its sole discretion re-set the vote count to zero, remove votes appearing to be generated by robots or scripts, or remove the modules used to collect feedback and votes.