Share  |  Print
The Tom Joyner Show
Money Mondays

July 8, 2019

The Trade War Continues
Mellody Hobson on the Tom Joyner Morning Show - Money Mondays
Mellody describes how the next round of tariffs on Chinese imports will be felt by consumers.
This morning we are once again focused on the U.S.-China trade tensions and their ripple effects. What is the latest out of Washington?

More shots were fired in the trade war last week, Tom. On Thursday, President Trump took to Twitter to announce that he intends to impose a 10 percent tariff on the remaining $300 billion in Chinese imports that have been spared in the trade battle so far. These tariffs would go into effect on September 1, and when they do, the president will have imposed tariffs on all goods the U.S. imports from China. But this round will be different, Tom.

What is different about this round?

For the most part, previous rounds of tariffs targeted industrial goods and raw materials used to manufacture final products. They were designed to put the squeeze on Chinese companies and pressure firms to move their supply chains out of China back to the U.S., all while avoiding too much pain for Americans by avoiding tariffs on consumer goods. But we are past that now. This new round of tariffs, if they do go into effect, will be on finals products – goods that Americans buy off the shelves every day. Consumers can expect to feel the bite of this latest round of tariffs, Tom.

Give me an idea of what products will be affected?

A wide range of consumer goods will be affected. Everything from consumer electronics to clothing and shoes to toys. Considering 42% of apparel, 70% of all shoes, and 85% of toys sold in the United States are made in China, consumers will certainly feel the pinch. And all of this comes on top of the financial pain the U.S.-China trade war has already inflicted on American families. According to a report from the New York Federal Reserve, previous rounds of tariffs are costing the typical U.S. household more than $1,200 a year. When Trump increased tariffs in May, it hit some consumer goods including luggage, bikes, handbags, hats and baseball gloves. The costs for consumers will rise steeply if this new round of duties does go into effect in a month.

Is it just consumers who feel the pinch?

No. Businesses – from manufacturers to retailers – are all going to feel the effect of these tariffs as well. Rising prices on supplies mean higher product costs and higher product costs mean fewer sales. This is compounded by the fact that consumers now have less disposable income. In the broader economy, we have certainly seen the trade war take its toll in recent months. GDP growth has slowed in recent months, and manufacturing numbers have been flat.

How has the trade war affected the labor market? What did last week’s jobs report tell us?

Despite increased trade tensions with China and a note of caution from the Federal Reserve, the labor market continues to be steady. Employers added 164,000 jobs in July, according to the Labor Department, continuing a record hiring streak that has kept the unemployment rate at or below 4% since last March. The report shows that the economy’s foundation remains strong, even as the President’s battle with China and a slowing global economy are causing some anxiety.

The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. You should consult a tax professional. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.

Past performance does not guarantee future results. © Ariel Investments, LLC. This website and all of its content is for informational and educational purposes only and should not be considered to be investment advice or a recommendation to buy or sell any particular security. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC. Use of this website is subject to our Terms & Conditions. The Ariel mutual funds referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to ineligible investors, investors for whom such products, funds or services are not suitable, or investors outside the United States.

Check the background of this firm on FINRA's BrokerCheck
Ariel Distributors, LLC is a member of the Securities Investor Protection Corporation