Fearing a Trade War?

The topics of foreign trade and tariffs have been spooking the investment markets lately. Will these issues become a major problem for the US and foreign investors? Let's look at the big picture trends with US trade. This chart shows us foreign trade over the last half century. Up until the late 1970s, the US actually exported more to the rest of the world than it imported. We had a trade surplus over the last 40 years that has changed dramatically. We now import much, much more than we export. The US now has a significant trade deficit.

Free trade among countries has been a strong trend for decades now, with both positive and negative results. On the one hand, free trade has helped US consumers by bringing us lower costs for things we buy. Things that are manufactured, or grown in other countries. And that is good. On the other hand, free trade has also resulted in the movement of much of our manufacturing sector, and the manufacturing jobs associated with it away from the US to countries with low cost labor. Now, there is more talk about trade tariffs to protect US manufacturing and restrict free trade. How will it all play out? No one knows for sure, but there are a couple of very important thoughts and keep in mind.

Number one, the US is much better positioned to deal with restricted trade than virtually all other kinds of countries. Countries such as China and Mexico have lots to lose if they cannot sell into our US consumer markets. Advantage US. Tariffs are easy to take down if they are not achieving the desirable effect. If the US economy starts to stall out, there will be a strong initiative to quickly remove these tariffs. To sum up, don't expect a trade war to derail the US economy, or to have a significant longterm effect on the investment markets. If you have any questions or comments, please feel free to let us know. See you soon.

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