As the US-China trade row gets uglier, who has more to lose?

As the US-China trade row gets uglier, people are asking: Who has more to lose? And how does this end?

China appears to have more to lose economically in an all-out trade war. Nearly 20% of its exports go to the US.

According to the Washington Post, it sold $506 billion in goods and services to the US last year. In contrast, the US sold $130 billion to the Chinese.

But this is more than an economic fight, and as always there are politics involved. There is a strong case that President Trump would be less able to sustain a lengthy conflict than the Chinese – especially with US midterm elections around the corner.

Even though some experts agree that some of China’s trade practices are questionable, they still argue that Trump’s response is at least similarly hazardous.

So let’s take a look down memory lane.

The last time there were any meaningful tariffs imposed on a genuine importer to the United States was during the 1960’s when President Lyndon Johnson imposed the “Chicken tax”.

The chicken tax was a 25% tariff on potato starch, dextrin, brandy, and light trucks imposed in 1963 by the US in response to tariffs placed by France and West Germany on importation of US chicken.

The period from 1961-1964 of tensions and negotiations surrounding the issue was known as the “Chicken War”. Over this same time period the S&P 500 index increased by over 45%.

Truth be told, no one has any idea how long the trade row between the US and China will last. It could be weeks or even months before the two countries come to their senses.

Let’s see if history repeats itself.

Story credit: David Francis

By |2018-07-05T15:17:53+00:00April 6th, 2018|Investment|

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