It’s important to get a simple understanding of how tariffs are affecting the stock market and our economy. Tariffs are hurting many stock investors and it’s important to get an understanding of what they are doing.
A Tariff is a tax or duty to be paid on a particular class of imports or exports.
Simply put, a tariff is a tax on an import/export. When the money is collected they are known as duties or levies. Tariffs are usually charged as a percentage of a “transaction price”. These percentages vary from country to country. Analysis done by Greg Daco of Oxford University, discovered U.S., Japan, Europe and Canada charge a tariff percentage of 3.1% and below whereas Mexico and China reach to 4%.
Tariffs raise our government revenue and decrease pressure on our competitors. However, U.S. and China are two of world’s two largest economies and economists are declaring that China can stand to “hold their breath longer” in the trade-off than America.
The biggest concern lies with our fragile economy and corporate businesses. The “tax war” is effecting some of America’s most important businesses; soybeans farms, automobile manufacturers, steel and aluminum shipments, etc.
Rod Sides of Deloitte (U.S.) recently stated,
Consumers are feeling good, but if they see prices start going up, there could be a backlash. The average consumer hasn’t yet internalized what the tariffs mean to them and haven’t seen the prices rise.
The tariffs can contribute to price changes of imports/exports which may contribute to the delay of corporate investments and new projects. This has investors concerned for price changes on the stock markets and America’s wealth. The tariffs don’t only effect our portfolios as investors, but this also affects the global economy. The world is watching every move President Trump makes and how he responds to China. The pressure is on.
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