On Wednesday, the actions dropped in response to President Trump’s price announcement. The United States will impose a minimum tax of 10% on almost all imports, with much higher samples from dozens of countries.
Spencer Platt / Getty Images North America
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Spencer Platt / Getty Images North America
President Trump’s pricing announcement sparked a sharp drop in American stock market markets on Wednesday, a red warning sign flashing from economic benefits which should result from the expansion of the trade war.
The industrial average of Dow Jones dropped more than 1,500 points, or 3.6%, Thursday in the minutes following the opening bell. The wider S&P 500 index has dropped by more than 4% and the Nasdaq index rich in technology has dropped by almost 5%.
The markets abroad were also down. The Japan Nikkei index fell 2.8% overnight while the Kospi reference in South Korea dropped 1.1%.
Trump ordered a minimum tax and 10% on almost all imports from this weekend, with much higher prices on dozens of countries, including some of the closest allies to the United States. Imports from the European Union will face a tariff of 20%, while Japanese products will be taxed at 24%.
Imports from Canada and Mexico are spared for the moment spared.
Economists warn that new taxes will increase prices and slower growth in the United States, while probably pushing many other countries in the recession.
The prices amount to an increase of almost nine times in the American import tax in force last year. The size and scope of levies, announced after the closing of the US stock market, have taken many investors by surprise.
“This changes the game, not only for the American economy, but or for the world economy,” wrote Oli Sonola of Fitch Ratings in a research note “You can throw most of the forecasts at the door, if this rate rate remains for an extended period.”
The actions of companies based on imports are among the hardest affected. Apple lost 9% of its value, while Nike stocks fell 13% and Amazon fell 7%.
Just as Trump tried to build a wall against illegal immigration during his first mandate in the White House, he is now erected an economic obstacle against world trade, in order to restrict imports and encourage national manufacturing.
“We are going to produce cars and ships, fries, planes, minerals and the drugs we need here in America,” Trump said in the White House Rose. “They all come back to our country because if they don’t, they have a big tax to pay.”
But while national manufacturers are supposed to be the beneficiaries of the trade war, many factories are preparing for higher costs and a loss of export markets. Trade partners have already promised to retaliate with prices that have their own American exports.
“Here, it comes and we already see it,” said Tim Fiore, who conducts a monthly survey with factory directors for the supply management institute. “The reprisals will be really ugly. It will just kill the request.”
Trump maintains that his new prices are simply designed to correspond to commercial barriers that other countries impose on American exports. But the White House has recognized, it would be too difficult to calculate real trade barriers in each foreign country. Officials therefore simply chose a number that they thought they were high enough to eliminate the trade surplus of each country with the United States
The result is a huge 34% tax on imports from China (in addition to the 20% tariffs that Trump has already imposed) and a price of 46% on Vietnam goods. Many factories have moved from China to Vietnam to escape Trump’s previous prices.
The United States launched a similar world trade war in the 1930s. It did not end well. It is believed that the notorious prices Smoot-Hawley have aggravated the great depression.
“It was bad for consumers because it meant higher prices,” said former Treasury Secretary Larry Summers. “It was bad for producers, because it meant higher contribution costs. And it was bad for peace, because it undermined marketing among nations.”
Economists say that Trump’s new prices are even more draconian, even hitting products that the United States is unable to produce at the national level, such as coffee and bananas.
