The latest news has more symbolic importance than strictly economic: On July 21, the Trump administration ordered China’s consulate in Houston to close to “protect American intellectual property and Americans’ private information,” according to US State Department spokeswoman Morgan Ortagus. She did not elaborate on specifically what data was in question. Chinese officials in the consulate responded to the closure by burning confidential documents, with smoke visibly rising from the building. 

Five days later, China retaliated by closing the American consulate in the city of Chengdu in condemnation of America’s move. The Houston and Chengdu consulates aren’t the biggest or most important, but their closings are a definitive sign that U.S./China relations are only worsening. 

What’s a trade war, and why is this happening?

A trade war is when one country increases or implements taxes called “tariffs” on imports and occasionally exports from a particular nation. When that nation retaliates with tariffs of their own, we consider this a trade war. 

The Trump Administration began the trade war in 2018 because it believes China isn’t playing by the rules on the global market. For example, the Chinese government partially subsidizes some private companies, which allows those companies to produce goods at a lower selling point than their competitors and secure a valuable, lasting foothold in the market. China has also been accused of spying and stealing private data, most recently in the form of coronavirus vaccine developments. 

The Trump administration doesn’t want to rely so heavily on a global power it can’t trust or control. But instead of going through the World Trade Organization to solve its problems, it chose to start a trade war. 

President Trump also ran on an “America First” platform, which aims to advance the interests of U.S. manufacturers, in part by withdrawing from trade treaties and prior trade agreements. In the past few years, the U.S. has put tariffs on foreign steel and aluminum, not only from China but also Canada and Mexico. It has also taxed solar panels and washing machines, primarily from Asia.

Who does trade war affect in the U.S.?

This directly affects farmers, steel workers, and manufacturers who would typically ship their goods to China, but due to high tariffs, have lost clients there. Soybean farmers were an example of this, and the Trump Administration even bailed them out to the tune of $12 billion in 2018. In fact, the U.S./China soybean market was so disrupted that China made a soybean exemption last September. 

The trade war also affects anyone who imports goods or products from China. Due to the increased tariffs, they’ve been paying more for their supplies, and/or have to make due with different, less-than-ideal products from somewhere else. One third of American small businesses may have been negatively affected by the trade war. And all together, American companies’ stock prices may have lost as much as $1.7 trillion due to this trade war. 

Finally, the trade war affects American consumers, since businesses need to increase prices to pay for tariffs. In 2018 and 2019, the average cost to American households was an extra $650 per year, according to Chief U.S. Financial Economist for Oxford University Kathy Bostjancic. With additional sanctions added in 2020, that number has jumped to $2031 per year, according to the National Foundation for American Policy. 

Sorry to say: It’s unknown. So far, China has been comfortable retaliating in kind to The Trump Administration’s penalties, but not escalating them. Relations are at a low point now, but this could change based on upcoming presidential election results, and/or a change in strategy from either side. 

The post How the Trade War With China Can Cost You appeared first on Stash Learn.

In fact, President Trump expanded the economic battle to other countries this week, by slapping new tariffs on Argentina, Brazil, and France.

This week, Trump said he plans to impose new tariffs on industrial aluminum and steel from Argentina and Brazil. He said he’d also ramp up tariffs on a variety of popular French imports to the U.S.

By increasing tariffs on imported goods such as steel, the president hopes to make good on his 2016 promise to invigorate American companies, according to Fortune. However, steel companies are struggling, with U.S. Steel reporting a third-quarter loss of $35 million.

The trade war goes global

President Trump announced by tweet on December 2, 2019, that the United States would impose a 25% tariff on steel and a 10% tariff on aluminum from Argentina and Brazil as well as a 100% tariff on $2.4 billion worth of French foods and products.

Argentina and Brazil had previously been excluded from steel and aluminum tariffs in 2018 when the U.S.  reportedly imported $2.6 billion of steel from Brazil and $700 million of steel from Argentina.

President Trump alleged in the Twitter thread that both countries manipulate their currencies, hurting the American economy. Experts have disputed this allegation, claiming that Argentina and Brazil are actually trying to strengthen their currencies against the dollar. Instead, the president could be taxing Argentina and Brazil because they’ve sold billions of dollars worth of soybeans to China, which has halved its soybean purchases from the U.S. according to Bloomberg.

France has also been caught up in the trade war. In July, 2019, France passed a law placing a 3% tax called the Digital Services Tax on big American tech companies that operate in France such as Facebook, Amazon, and Google.

Responding to this tech tariff at the NATO summit this week, the Trump administration suggested that it would tax $2.4 billion worth of French goods at 100%, which could double the price of French favorites like wine, cheese, and cookware in the U.S.

The French Economy Minister Bruno Le Maire alleged that this 100% tariff would elicit a strong response from the entire European Union. The European Union on the whole recently became subject to American tariffs on $7.5 billion worth of European products.

South Korea too

In January, 2018, the Trump administration imposed a 50% tariff on washing machines from South Korea and a 30% tariff on solar panels from China. The move followed a push by domestic manufacturers of both products to get U.S. trade officials to impose taxes on imports, as a way to protect them from international competitors.  

The trade war’s impact on the U.S. economy

The trade war is reportedly costing American consumers. With the current tariffs in place, American households will spend an extra $2,031 per year, according to the National Foundation for American Policy.

Additionally, though Trump’s steel tariffs initially boosted the industry in 2018 with the creation of jobs and an increase in steel prices, the manufacturing sector remained slow for the fourth consecutive quarter as of December 2019.

Farmers say they are struggling because of the trade war as well. Countries such as China are raising tariffs on American agricultural products in response to the United States’ increased tariffs on Chinese goods, which some agricultural experts say may cost American farmers.  For example, China bought 5.9 million tons of soybeans from the United States during the first half of 2019, less than half of the 13.4 million tons that China purchased in the first half of 2018.

Background on the Trade War

• A trade war is when countries start waging an economic battle with each other using tariffs. One country will put tariffs on another’s goods, and the other will retaliate in kind.
• Over the last 30 years, the U.S. has signed numerous trade treaties to avoid trade wars, including the North American Free Trade Agreement (NAFTA).
• Agreements like this reduced the threat of trade wars, in part by eliminating many tariffs on exported and imported products.
• The Trump administration has been able to raise tariffs because of Section 301 of the Trade Act of 1974. Section 301 states that the United States can raise tariffs on countries that violate trade agreements or demonstrate unfair trade practices.
• Since 2018, the United States and China have notably been taking turns raising tariffs on each other’s exports. In May 2019, the United States doubled tariffs on $250 billion of Chinese products and China responded by announcing tariffs on $60 billion of American products. Steel, soybeans, whiskey, lumber, and other products have been caught in the crossfire of the trade war.

The post The Trade War Isn’t Just About China appeared first on Stash Learn.

The tweet was reportedly meant to show support for protesters in Hong Kong, where hundreds of thousands of people have demonstrated for weeks against mainland China, asking for greater access to democracy and political representation.

Instead, it has caused an ongoing backlash in China, where some of the nation’s biggest businesses have reportedly withdrawn their sponsorship of the NBA over the controversy.

The NBA’s commissioner has defended Morey’s right to freedom of expression, but the NBA also issued an apology to China, which itself is the subject of controversy. Some critics have said it shows the NBA appears to be more concerned with its profitable relationship in China than the political freedoms of the country’s citizens.

Companies often need to walk a fine line when it comes to politics, and business relationships with China can be complex. China is one of the largest economies in the world, but it also has an authoritarian government, and numerous other U.S. companies have reportedly walked back political statements challenging China in recent months, or bowed to government censorship in other ways, to continue doing business there.

Here’s an explainer:

China and the NBA

The NBA is a huge moneymaker, with annual revenue of about $8 billion, according to Forbes. However, China accounts for nearly 10% of the NBA’s total revenue, an amount that’s expected to increase to 20% in the next decade according to reports. China is also the basketball league’s largest market outside of the U.S.

China, which has a population of 1.4  billion, has the second-largest economy in the world after the U.S., valued at about $14 trillion. And it’s an important market for U.S. businesses of all kinds.

While China’s economy has operated with free-market principles for decades, the country’s government is communist and authoritarian. Although its businesses have tended to operate freely for decades, they have come under growing government supervision and control, according to experts. Increasingly, U.S. businesses have encountered free-speech issues operating there.

In reaction to the Morey’s tweet, the NBA’s Chinese sponsors have reportedly pulled their support for the league, including media conglomerate Tencent, which claims to have 500 million customers to whom it live streams NBA games, as well as China Central Television, smartphone maker Vivo, numerous large Chinese retailers, and a Nissan partnership in China.

Additionally, the Chinese Basketball Association reportedly severed all ties with the NBA.

Not just the NBA

• Facing media criticism in China, Apple reportedly recently disabled an app that helped Hong Kong demonstrators track the whereabouts of police.
• Search engine company Google, which has been banned from operating in China for years, has been working on a censored version of its search engine to operate there, according to reports.
• Gaming company Activision Blizzard suspended a Hearthstone champion who voiced support for Hong Kong demonstrators and revoked a $10,000 prize he’d earned playing the game.
• American Airlines, Delta Air Lines, and United Airlines no longer refer to Taiwan as a separate country on their booking websites. Taiwan has asserted its independence from China since the 1940s.
• Marriott fired an employee in Omaha, Nebraska in 2018 for liking a Tweet that commended the hotel chain for listing Tibet as an independent country. China claims that Tibet is under its sovereignty, and Marriott later apologized to China and changed the listing status of Tibet, according to the Washington Post. (China had allegedly threatened to shut down Marriott’s website in China.)
• In order to tap the huge Chinese market, various film studios in Hollywood have adapted scripts so they pass scrutiny with Chinese censors.

More about Hong Kong

Hong Kong reverted back to Chinese rule in 1997, after nearly 100 years as a colony of Great Britain. Protestors there have demonstrated for greater freedom from mainland China, and have gone as far as to shut down the airport on the island, which is one of the busiest in the world. The protests began this summer over a law that would allow mainland China to extradite Hong Kong citizens, meaning they could be sent there to stand trial.

The trade war with China

The U.S. and China are also engaged in a trade war, and rhetoric between the two countries has gotten heated.

• Trade talks between China and the U.S. have repeatedly broken down, which has caused some market turmoil in the U.S.
• The Trump administration has threatened tariffs on $550 billion of Chinese imports.
• In response, China has called for a halt to purchases of American agricultural products.
• Over the summer, China let the value of its currency, called the yuan,  fall. Very generally, China pegs its currency to the dollar. So that means every yuan exchanged equals a fixed amount of dollars, and that fluctuates with the value of the dollar. By letting its currency devalue, or fall below its current value, China made its own goods and services cheaper in export markets.

Comic relief

The cartoon South Park, often raunchy and controversial, has also ventured into the fracas. A recent episode criticized censorship in China. China then banned the cartoon from its airwaves. Last week cartoon creators Trey Parker and Matt Stone tweeted in response:

Watch the full episode – https://t.co/oktKSJdI9i@THR article – https://t.co/nXrtmnwCJB pic.twitter.com/Xj5a1yE2eL

— South Park (@SouthPark) October 7, 2019

*By tapping on the link above, you are going to a website not managed by Stash which is subject to a different privacy policy and terms of use.

Remember the Stash Way

Investing can be scary and confusing, especially when markets are volatile.

That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can help guide you as you make your first investing decisions. We call our approach the Stash Way. Here are its three pillars:

• Invest for the long-term
• Invest regularly
• Diversify

You can learn more about the Stash Way here.

The post All About the NBA’s China Dilemma appeared first on Stash Learn.

Stock market indexes around the world dropped on Monday, August 5, 2019  as China retaliated by canceling orders for U.S. products, and by devaluing its currency.

What’s happening with the trade war with China?

• Trade talks between China and the U.S. broke down, over an alleged agreement that China would purchase more products from the U.S.
• The Trump administration threatened a new round of tariffs, in addition to the $250 billion it has already placed on Chinese imports.
• In response, China has called for a halt to purchases of American agricultural products.
• China is also allowing the value of its currency, called the yuan, to fall. It’s a little complicated, we know, but bear with us. China pegs its currency to the dollar. Very generally, that means every yuan exchanged equals a fixed amount of dollars that fluctuates with the value of the dollar. By letting its currency devalue, or fall below its current value, China makes its own goods and services cheaper in export markets.
• Last week, the Federal Reserve also cut a key interest rate in the U.S., in an attempt to keep the U.S. economy from slowing down.

What’s a trade war again?

A trade war is when countries start waging an economic battle with each other using tariffs. One country will put tariffs on another’s goods, and the other will retaliate in kind.

A tariff, sometimes called a duty, is a tax imposed by one nation on another’s imports. (In some cases, tariffs can be “levied”–or placed–on exports.) The tariff is generally calculated as a percentage of the import’s total value, including freight and insurance charges.

Governments tend to impose tariffs on another’s goods to make their own products more competitive and affordable, and to generate revenues.

Until recently, the U.S. has generally refrained from increasing tariffs and entering into trade wars with other countries.

The trade war with China could decrease global growth by $1.2 trillion, according to recent reports. The U.S. and China are the world’s first and second-largest economies.

Remember the Stash Way

Investing can be scary and confusing, especially when markets are volatile.

That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can guide you as you make your first investing decisions. We call our approach the Stash Way. Here are its three pillars:

• Invest for the long-term
• Invest regularly
• Diversify

You can learn more about the Stash Way here.

The post The U.S.-China Trade War Explained appeared first on Stash Learn.

On Friday, U.S. tariffs on $34 billion worth of Chinese goods officially kicked in. China responded with tariffs of its own on U.S. products.

What’s a trade war?

A trade war is when one country puts tariffs, or taxes, on another’s imports. The other country then responds with tariffs of its own.

What’s a tariff?

A tariff, sometimes called a duty, is a tax typically imposed by one nation on another’s imports. (In some cases, tariffs can be levied on exports.) The tariff is generally calculated as a percentage of the import’s total value, including freight and insurance charges.

The U.S. has put taxes on products many U.S. manufacturers import as part of their supply chains, such as auto and jet engine parts, as well as compressors and electrical components. China, in turn, is reportedly putting taxes on soybeans, aircraft, and cars.

How a trade war could affect you

There are concerns that a trade war will increase costs to buy goods for U.S. consumers. There are also worries that tariffs could cost workers their jobs in various manufacturing industries, as expenses increase.

For example, on the import side, numerous industries depend on cheap steel, which they get from China and other markets, to manufacture products. Tariffs are likely to increase the cost of steel at home, and those increases are likely to be passed along to the consumer in the form of higher prices.

On the export side, China is placing tariffs on our agricultural products and beef, which will make these products more expensive to sell in China. U.S. soybean farmers are one group who are likely to get hit by tariffs from China. (In related news, U.S. exporters of cheese say they’re feeling the pinch from a parallel trade war running with Mexico.)

Why is this happening?

President Trump ran on an “America First” platform, which aims to advance the interests of U.S. manufacturers, in part by withdrawing from trade treaties and prior trade agreements.

In recent months, the U.S. has put tariffs on foreign steel and aluminum, not only from China but also Canada and Mexico. It has also taxed solar panels and washing machines, primarily from Asia.

The Trump administration is planning another round of tariffs on an additional $216 billion worth of Chinese products later this summer and into the fall, according to reports.

The post Trump’s Trade War With China Begins appeared first on Stash Learn.

The accord, which waived economic sanctions on Iran in exchange for a halt to its nuclear weapons program, was originally put into place by the Obama administration in 2015.

Under the deal, Iran agreed to concessions, most notably reducing its uranium stockpile, and allowing inspectors from the International Atomic Energy Agency to monitor its declared nuclear sites.

Trump, however, has decided to reverse course and withdraw the U.S. from the agreement, while also reinstating sanctions on Iran.

What’s a sanction?

A sanction is a type of penalty, typically levied by one nation or group of nations on another in an effort to deter or punish certain behavior.

In this case, Iran was sanctioned by the U.S. for attempting to build a nuclear weapon. Those economic sanctions–which are commercial or financial in nature–were meant to put pressure on the Iranian government by hurting the country’s economy through blocked trade and transactions.

In pulling out of the nuclear pact, Trump announced that the U.S. will reinstate sanctions previously lifted under the deal.

American allies, including leaders from France, the U.K., and Germany, unsuccessfully tried to pressure Trump into recertifying the deal.

Why is Trump pulling out of the deal?

There isn’t a clear answer, though Trump has said that he wants an agreement that sticks tougher restraints on Iran, including limits on its nuclear fuel production. He also opposes the current deal’s sunset provision, which allows Iran to resume its nuclear program after 2030.

Trump has called the accord, in its current form, the “worst deal” and “an embarrassment.”

Trump has also claimed that Iran was cheating or not sticking to the terms of the deal; A claim to which he has provided no evidence, and that his own intelligence agencies have refuted.

The immediate fallout

The immediate effects of Trump’s decision are that American allies–notably countries in the European Union–will be alienated, and strain already tense relationships.

“France, Germany, and the UK regret the U.S. decision to leave the JCPOA,” French President Emmanuel Macron tweeted following Trump’s announcement. “The nuclear non-proliferation regime is at stake.”

Iran, taking America’s cue, could also decide to violate the terms of the deal and ramp up nuclear activities.

Iranian leaders have, however, said they’re willing to continue working within the accord’s framework with its co-signers for the time being.

Business and the economy

There are also many business dealings–between both American and European companies–in the works involving Iran. Boeing, for example, could lose $20 billion in aircraft sales to Iran as a result of Trump’s decision. General Electric, also, had deals in place to supply Iran’s oil and gas sector with equipment, which could now be threatened.

Another company, Volkswagen, returned to Iran after 17 years once the nuclear deal was signed and sanctions were lifted. Now that the deal is off, it may need to once again pull out of the country.

French aerospace company Airbus, like Boeing, may also need to scuttle its plans to sell planes in IranAir, Iran’s national carrier.

As the reinstatement of sanctions all but puts a stop to those deals and more, it could also create stock market volatility and have other economic effects.

Trump’s decision also increases the possibility of military action in the future–assuming Iran resumes work toward building a nuclear weapon.

What you should prepare for

For the average American,  the single biggest–or at least most noticeable–consequence of Trump’s decision is likely to be rising fuel prices.

Gas prices have already been on the rise over the past year, and reinstating economic sanctions on Iran, the world’s fifth-largest oil producer, could result in higher prices at the pump.

The terms of the nuclear deal allowed Iran to export oil to other countries. But with sanctions reinstated, it will no longer be able to export, and as a result, the global oil supply will get smaller. Lower supply can lead to higher gas and home heating prices.

Aside from costlier commodities, your portfolio could also be in for a wild ride as the markets react.

For example, the markets dropped considerably after Trump announced tariffs on Chinese goods, stoking fears of a trade war. The markets could act similarly regarding Iran.

There’s also a strong possibility that defense and aerospace stocks could rise or drop if the U.S. considers military action. The same could be true for domestic oil companies if world oil supplies shrink.

The post Trump Scrapped the Iran Nuclear Deal, and Here’s How It Could Affect You appeared first on Stash Learn.

The trade deficit is one one of the rationales offered by the Trump administration for possibly imposing stiff tariffs on a wide array of Chinese exports.

What is the trade deficit?

In simplest terms, a trade deficit, sometimes referred to as a trade gap or an account deficit, is when a country imports more than it exports, which can lead to all kinds of economic issues.

But what does the trade have to do with billions of dollars worth of potential tariffs on Chinese goods, such as steel and aluminum?

We’ll break it down for you.

Let’s talk trade

We live in a global economy. Nations import and export their goods, to and from each other all the time. In fact the global economy for exports is worth a staggering $16 trillion, according to the World Trade Organization.

All countries have what’s called a trade balance–that’s the sum of what it imports and what it exports. If a country imports more than it exports, it has a negative trade balance, or deficit. If it exports more than it imports, it has a positive trade balance, or surplus.

Why do countries trade?

Think of it this way: Companies in a particular country produce goods they want to sell. There’s a domestic market for sales, but there are also foreign markets–other countries might want to buy what another country produces. And that’s particularly the case if that country doesn’t manufacture or grow those things itself.

The U.S., with its rich farmland in the Midwest and elsewhere, is one of the largest exporters of wheat, for example. And although the situation has changed dramatically in recent years,  the U.S. used to import much of its petroleum from the oil-rich Middle East, when it seemed like our own supplies were limited.

Getting it cheaper from someplace else

But it’s not always the case that a country imports a particular good because it doesn’t have it, or produce it domestically. Sometimes wealthy countries such as the U.S. purchase exports simply because the goods may be cheaper than what they can produce themselves.

For decades that’s been the case with the U.S. and China, and other Asian countries, where the price to produce common items from clothing to electronics is often much less expensive than the cost to produce the same items domestically.

In fact, China’s access to cheap labor and sophisticated manufacturing has made it the biggest exporter in the world.

Cheap products are great for U.S. consumers who benefit from the reduced prices. On the other hand they may not be so good for U.S. workers, if the jobs producing those items are all based overseas.

This is the theory of the Trump administration, which has said our trade deficit is killing jobs at home.

Surplus vs deficit

If a country imports more than it exports, that country runs what’s called a trade or account deficit. That’s in contrast to an account surplus, if a country exports more than it imports.

Simply put, a surplus is more appealing than a deficit, because it puts a country’s economy in a stronger position.

Here’s why: It actually costs us money to import more than we export. In order to buy all those goods from overseas, U.S. companies exchange dollars for the local currency of the country manufacturing what we buy.

Here’s where it gets a bit complicated.

That means U.S. dollars accumulate in central banks overseas, which typically use those dollars to purchase our Treasury debt, since it pays interest.

But Treasuries are a form of debt. So those export dollars wind up as loans to the U.S. government, essentially increasing national debt.

What does this have to do with the U.S. and China?

Currently, the U.S. exports about $2.2 trillion of goods and services annually, and imports about $2.7 trillion, according to International Trade Administration. That means we have a trade deficit of roughly $500 billion annually.

Most of that gap, or $375 billion, is with one country–China. And that’s a prime reason why President Trump has called for the tariffs.

His hope, based on the theories of his economic advisors, is that tariffs will reduce the trade deficit by making Chinese products more expensive for the U.S. to import.

That in turn, Trump and his advisors have suggested, could increase U.S. manufacturing and jobs.

Will it work?

Time will tell. Tariffs are not a one-way street. China has threatened to retaliate with billions of dollars worth of its own tariffs, which could give U.S. manufacturers and exporters a hard time.

Aerospace manufacturer Boeing, for example, has voiced concerns recently that a trade war could harm its U.S. business.

The post What’s a Trade Deficit? appeared first on Stash Learn.

Read more about recent US tariffs on aluminum and steel.

That could increase costs for U.S. consumers, and also reduce demand for U.S. exports, which could dent our economy, according to experts.

Why is this happening?

Over the last 30 years, the U.S. has entered into numerous trade treaties.

You may be familiar with the North American Free Trade Agreement (NAFTA). These treaties are complex multilateral agreements that favor negotiations between all countries that sign.

Winning trade wars isn’t easy, as history has shown us.

Agreements like this reduced the threat of trade wars, in part by eliminating many tariffs on exported and imported products.

Trump has argued such agreements have flooded the U.S. with cheaper foreign-made goods, which make it difficult for U.S. manufacturers to compete.

In 2017, the U.S. signed a less comprehensive trade treaty with China, but Trump has said recently that products from China–in particular steel–have cost the U.S. 6 million jobs, and have caused 60,000 factories to close. Economists reportedly dispute these figures.

Trade wars: High school history class flashback

Winning trade wars isn’t easy, as history has shown us. Many analysts are digging back into their history books to remember the Smoot-Hawley Act tariffs and the “trade wars” that collided with the Great Depression of the 1930s.

The Act bumped the average U.S. tariffs to 45 percent from 38 percent. Still, other countries were not happy with the U.S. in the early 1930s. Several countries, including Canada, immediately responded with their own tariffs. Soon other countries jumped into the fray and a global trade war broke out in 1931, thus sparking a European financial crisis.

While Smoot-Hawley has been blamed for worsening the Great Depression, most economists say the conditions that drove down the U.S. economy were far more complex than that. The tariff-related Act was introduced before the Great Depression, although its impact was largely felt during those tough subsequent years.

President Richard Nixon temporarily introduced tariffs back in 1971 to fight stagflation. President George W. Bush briefly introduced steel tariffs in 2003 but repealed them several months later after the tariffs were seen to have negatively affected the economy.

What makes this time different?

The move by this administration is unusual because the president is justifying them on the grounds of national security.

Read more about how China is responding to President Trump’s tariffs.

How can a trade war affect U.S. consumers?

There are concerns that a trade war will increase costs to buy goods for U.S. consumers. There are also concerns that tariffs could cost workers their jobs in various manufacturing industries, as expenses increase.

On the import side, numerous industries depend on cheap steel to manufacture products. Tariffs are likely to increase the cost of steel at home, and those increases are likely to be passed along to consumer in the form of higher prices.

On the export side, China is likely to place tariffs on our agricultural products, which will make these products more expensive to sell in China.

Similarly, tariffs could hit tech companies such as Apple, which reported that more than 20% of its global sales in this past quarter came from China and the greater China region, which includes Hong Kong and Taiwan.

The post What’s a Trade War? appeared first on Stash Learn.

Three key indexes, the Dow Jones Industrial Average, the S&P 500 and the tech-heavy Nasdaq all lost more than 2% of their value, according to reports. The Dow lost more than 700 points in afternoon trading.

Markets reacted to fears that the tariffs could prompt a trade war, which has the potential to damage the U.S. economy, and cut down on Gross Domestic Product (GDP) growth.

The tariffs that Trump announced today will target up to 1,300 items produced in China, including aeronautics, high-speed rail, alternative energy vehicles, and high tech products, according to CNBC. It is also meant to punish China for what the administration has said is intellectual property theft from U.S. businesses.

Earlier in March, Trump said he would place a tariff of 25% on foreign steel, and one of 10% on aluminum imports. While China is the largest steel producer in the world, those tariffs will potentially affect metals produced in several countries. Similarly in January, the president announced tariffs on foreign-made solar panels and washing machines.

What are tariffs?

A tariff, sometimes called a duty,  is a tax typically imposed by one nation on another’s imports. (In some cases, tariffs can be levied on exports.) The tariff is generally calculated as percentage of the import’s total value, including freight and insurance charges.

In principle, governments impose tariffs to make their own products more competitive and affordable, and to generate revenues.

What’s a trade war?

A trade war is when countries engage in a tit-for-tat over tariffs. In response to U.S. tariffs on Chinese goods and services, China could impose tariffs of its own on U.S. steel, as well as other exports.

That could increase costs for U.S. consumers, and also reduce demand for U.S. exports, which could dent our economy, according to experts.

Over the last 20 years, the U.S. has entered into numerous trade treaties, the most famous of which is perhaps the North American Free Trade Agreement (NAFTA). These treaties, which are complex multilateral agreements that favor negotiations between all countries that sign, have reduced the threat of trade wars, in part by eliminating many tariffs on exported and imported products.

Trump has argued such agreements have flooded the U.S. with cheaper foreign-made goods, which make it difficult for U.S. manufacturers to compete.

In 2017, the U.S. signed a less comprehensive trade treaty with China, but Trump has said recently that products from China have cost the U.S. 6 million jobs, and have caused 60,000 factories to close. Economists reportedly dispute these figures.

China threatens retaliation

Chinese officials said they would take whatever action they deemed necessary to protect their interests in the face of new tariffs. That could include placing tariffs of their own on the $19.4 billion of agricultural products the U.S. ships to China each year, the majority of which is soybeans, according to reports.

A tariff, sometimes called a duty,  is a tax typically imposed by one nation on another’s imports.

“China absolutely won’t sit back and allow its legitimate rights and interests to be harmed and will take all necessary measures to protect” them, China’s Commerce Ministry said in a statement Thursday, according the Wall Street Journal.

Good to know: As the Trump administration announced the tariffs on China, it also said it would exempt trading partners including Argentina, the European Union, and South Korea from recent aluminum and steel tariffs.

How a trade war could affect you

Meanwhile, various businesses and trade groups expressed fears that the tariffs would increase costs for U.S. consumers, and could potentially result in job losses in the tech sector.

“Increased tariffs and trade wars risk the nearly 2.5 million American jobs associated with trade involving technology products,” Gary Shapiro, president and CEO, Consumer Technology Association, said in an emailed statement on Thursday.  “Such a move threatens U.S. economic growth and wipes out the benefits of our recent tax reform.”

The consumer technology industry represented more than 10 percent of the U.S. gross domestic product in 2017, according to the CTA.

The post Why Did Stocks Just Fall? Trump Stokes Trade War Fears appeared first on Stash Learn.