As expected, the Chinese have answered back to President Trump’s call to raise tariffs with no new trade deal in place yet.
In response, the Chinese have announced they will be imposing tariffs on $60 billion in U.S. exports.
The news of the Chinese response caused the DOW to plummet.
Trump’s economic advisors had warned him against getting into a sword fight with the Chinese over trade.
Senator Rand Paul (R-KY) even recently stated he cautioned Trump to leave things lie and continue to work out the details of a new deal without imposing more tariffs.
He further stated he knew of a local company in his home state that told him while the tax cuts were great, the tariffs already being imposed all but offset the benefits of the tax breaks.
On Friday, the U.S. had announced it would be hiking tariffs on $200 billion of Chinese goods.
The Chinese immediately hit back by saying that effective June 1, nearly $60 billion in U.S. exports to China would be hit with more tariffs.
With the tariffs having a full weekend for investors to mull, they clearly are worried, as the DOW was down more than 700 points as of noon on Monday.
Getting Back on Track
The last time the Trump administration hit the Chinese with raised tariffs, the Chinese economy took a brief hit, bringing them back to the bargaining table.
Investors will now be worried about another economic shakeup, fearing that if the Chinese economy takes a big downward shift, it will impact the global economy as well.
This should create a sense of urgency on both sides to get this worked out.
Even though the two sides have yet to come to a full agreement, Trump continues to tout a good relationship with Chinese leadership.
Hopefully, that enables both parties to come back to the table and get a deal hammered out before we face severe repercussions.
As stated in a prior article, Trump simply cannot afford to have the economy tank during the election season, as it is the one part of his agenda that knows no political lines.
As it stands today, he will get votes by undecided voters if they continue to make more money, but that will completely flip if we see a significant decline in the economy and mass layoffs begin to occur.
This may be downplayed by some outlets, but make no mistake about it, this is very serious and getting more serious with every passing day.
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