Trump Is Making A Mistake By Imposing Further Tariffs On Chinese Imports

Trump Is Making A Mistake By Imposing Further Tariffs On Chinese Imports

On 1 August 2019, the US President Donald Trump surprised the market with a new round of tariffs on the remaining goods imported from China.  Effective 1 September 2019, goods imported from China amounting to US$300 billion will be subject to 10 per cent tariffs. Trump threatened to raise the tariffs to 25 per cent or even higher if China retaliates. The topic of US-China Trade War is covered in multiple articles published on the website of Economics Cafe Learning Centre, the best economics tuition centre in Singapore. The economics tuition centre is founded by its principal economics tutor Mr Edmund Quek, who is considered the best economics tutor in Singapore.

A Taste of its Own Medicine

In 2018, the Trump government imposed 25 per cent tariffs on US$250 billion of goods imported from China. According to a study jointly conducted by the Federal Reserve, Princeton University and Columbia University, the tariffs cost US consumers and businesses some US$3 billion per month. This is consistent with the various indicators monitoring the performance of the manufacturing sector. The ISM Manufacturing Index has fallen to its lowest level since Donald Trump took office in January 2017. Another important reading, the Markit Manufacturing PMI is on the verge of falling into the negative territory, registering its weakest reading in 10 years. With guidance from your economics tutor in your economics tuition class, explain why the US consumers and businesses would suffer from tariffs imposed on Chinese imports.

With the heavy tariffs on Chinese imports, Trump vowed to bring back jobs to the US. It did not happen. It is true that some US manufacturers in China are considering relocating its production lines to other countries, amidst the mounting trade frictions between the world’s largest two economies. However, most of them are relocating to other developing countries such as Vietnam, India and Bangladesh instead of the US. You may consult your economics tutor in economics tuition for reasons why they prefer not to relocate to the US.

Consumers Will Feel the Pain

Ironically, the various gauges of the US consumer sentiments, such as the Bloomberg’s Consumer Comfort Index and University of Michigan’s Consumer Sentiment Index posted the best results in close to two decades. You may sign up for Mr Edmund Quek, the best economics tutor’s economics tuition class to learn the definition of consumer sentiments. Analysts believe that the US consumers have yet to feel the pinch as retail goods have not been very much affected by the previous round of tariffs. However, this is about to change.

From 1 September 2019, once the 10 per cent tariffs on the remaining goods kick in, the US consumers will have to make the painful decision of buying the same Chinese goods at higher prices or switching to goods imported from other countries. The US imports from China a variety of consumer goods worth close to US$270 billion. Topping the list are telephones, computers, clothes, furniture as well as toys and games. Some of these goods account for more than 50 per cent of the market share. This makes it difficult for the US economy to maneuver towards a more diversified portfolio of imported goods. In consultation with your economics tutor in economics tuition, explain why it is challenging for the US consumers to avoid paying higher prices. A good economics tutor should be able to guide his students in economics tuition to explore some possible solutions.

In response to Trump’s threat of more tariffs, stock markets tumbled across the globe. Economists expect the Federal Reserve to cut interest rates further to offset the negative impact of the US-China Trade War on the US economy. Lower interest rates may also lead to a depreciation of the US dollar which will have a positive impact on the US exports.

Linda Geng

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