Reviewing the charts in The Daily Shot is part of my morning routine. Many require careful interpretation, but it nearly always provides some useful information. The trade war is a theme today.
What is the impact of a US tariff hike on China? Here is one estimate of the effects.
This is a reasonable starting point, but we must also think beyond China. Will action against Europe be next? Also, I see little progress on NAFTA 2.0. There also could be second-order effects on business confidence.
Who is affected? Much of the discussion is simplistic. Here is a more helpful breakdown.
BCA research suggests these scenarios.
Is the end of June a good time frame to consider? Maybe not. When the March 1st "deadline" was announced, the punditry said resolution was impossible in that time frame. My own forecast was that the deadline could and would be adjusted as conditions changed. Recapping my conclusions:
- The impacts are gradual and difficult for most people to see. This permits -- even promotes -- spinning. The recent headline economic strength would be even better without the tariffs. To analyze, you need a "counterfactual." Few are able to think in these terms.
- An eventual deal is very likely. Powerful forces are at work in win/win situations. As the costs of the trade war show up, action will follow.
- The timing is impossible to predict. We should expect to be living with this issue for some time.
- The market effect is greater than you hear from the punditry. It has already shown up in earnings outlook.