I’m talking about the rapidly escalating global trade war.
It’s like a series of stink bombs lobbed into the biggest foreign economies of the world.
It makes some of their biggest companies smell to high heaven.
And it transforms global investors into collateral damage.
Some seem to think the trade war began with President Donald Trump.
But it’s been slowly building momentum…
Ever since the surging U.S. dollar made American goods expensive overseas, gutting our ability to compete in those markets…
Ever since the Great Recession transformed America’s industrial heartland into the world’s largest Rust Belt, and …
Ever since China became the second-largest economy in the world.
That’s why we began predicting this trade war long before anyone else.
And it’s also why, months before the 2016 election, we predicted Trump would win the presidency.
The key is this: The global trade war is already sending shock waves of fear up the spine of foreign investors.
They know their companies need access to the huge U.S. consumer market a lot more than American companies need access to theirs.
They see how it’s going to stink up the joint on their side of the world a lot sooner than it will in the United States.
This is why Trump has not hesitated to take the initiative and drop the first bombs.
Last year, he announced tariffs on imported solar panels, most of which come from China, and washing machines.
In March of this year, he tweeted that “trade wars are good” and gave the world a heads-up about steep U.S. tariffs on steel imports.
When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!
— Donald J. Trump (@realDonaldTrump) March 2, 2018
Europe responded with threats of retaliation against companies located in U.S. cities and states where Trump got the most votes in 2016.
That did not make him happy. He wrote:
“If the EU wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a tax on their cars, which freely pour into the U.S. Big trade imbalance!”
If the E.U. wants to further increase their already massive tariffs and barriers on U.S. companies doing business there, we will simply apply a Tax on their Cars which freely pour into the U.S. They make it impossible for our cars (and more) to sell there. Big trade imbalance!
— Donald J. Trump (@realDonaldTrump) March 3, 2018
Anyone who thought Trump was just bluffing learned differently on March 9. That’s the day he announced a tax on steel imports at 25% and aluminum imports at 10% — not just on select countries, but globally on virtually all producing countries.
On March 23, China hit back, vowing a “fight to the end … with all necessary measures.”
And on April 2, it did just that, slapping tariffs on U.S. imports, including a 15% duty on 120 American products such as fruits, nuts, wine and steel pipes, plus a 25% tariff on U.S. pork and recycled aluminum.
The next day, it was U.S. trade representatives’ turn to pound their chests. They recommended 25% tariffs on 1,300 Chinese goods — $50 billion worth of products in the aerospace, medical and machinery industries.
In May, there were some feeble attempts to back off from the trade war and negotiate peace. But that didn’t last very long.
On June 5, Mexico announced tit-for-tat tariffs and said it will target U.S. goods like bourbon and pork. The next day the EU threatened something similar.
Then just recently, Trump threatened to sharply escalate the trade conflict with China, asking his team to identify $200 billion in imported goods from China to be penalized with tariffs.
Adding that to tariffs already in place, the U.S. is now threatening tariffs on as much as $450 billion worth of Chinese goods.
That’s big. Far more, even, than the total Chinese imports from the United States.
Now do you see why this is going to sink foreign economies a lot more than ours?
Now do you see why global investors are so anxious to get their money to safer havens?
I’ve put together a special website that gives you a prescription for growing your wealth safely in these troubling times. It will be available until tonight, June 29, at midnight EDT.
Good luck and God bless!
Martin D. Weiss, Ph.D.
Founder, Weiss Ratings