Inside China's Latest $75 Billion Tariff Threat - How We Got Here

Video Credit: The Street
Published on August 23, 2019 - Duration: 01:10s

Inside China's Latest $75 Billion Tariff Threat - How We Got Here

China is retaliating.

China's announcement that it will impose tariffs on $75 billion worth of goods, with 25% tariffs on American automobiles set to go into effect December 15.

Some of the other tariffs could go into effect on September 1.

China wants to put 5% tariffs on U.S. crude oil and soybeans.

Refresher In early August, President Trump threatened 10% to 25% tariffs on $300 billion worth of Chinese manufactured goods that would go into effect September 1.That would intensify a trade war that's already in full swing, with many U.S. companies already having noted in May how they plan to mitigate existing tariffs.

Trump then pushed back the implementation date to December 15.

Nonetheless, China has decided to match the White House on its desire to play hard ball on trade.

U.S. Investors, afraid the economy is inching closer to recession on account of the trade conflict, have priced in more interest rate cuts from the Federal Reserve, with the S&P 500 still up 16% year-to-date, albeit falling Friday.

The 10 year treasury bond is yielding a measly 1.6%.

What to Watch Now Investors should take inventory of which goods are being taxed.

China specified some goods, but it's not clear those are all the goods that would be at risk from tariffs.

More importantly, this raises the question of whether the Federal Reserve will be more compelled to cut interest rates than it was Thursday before the news of China's retaliation.

As Federal Reserve Chairman Jerome Powell speaks in Jackson Hole Wyoming Friday, investors will be listening to how much more dovish he will get, and then deciding over the weekend and next week what the net effect of more tariffs and more rate cuts will be on stocks.

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