The plan by President Donald Trump to impose tariffs on certain imported products has raised concerns beyond the fear that such a policy could increase costs for American businesses and consumers. One economic observer believes that a “trade war” could reduce foreign investments, resulting in even more serious consequences for the U.S. economy.
Susan Aaronson, a professor of international affairs at George Washington University and an expert on trade policy, expressed the belief that such a policy could weaken the image of the United States as a reliable trading partner and thus a good place to make an investment. This is significant when considering that foreign businesses or organizations comprise approximately one-third of the investors in the American stock market. Additionally, about the same number of foreign entities own American treasury bonds, which are used to finance the American government and its many services.
In a theory outlined by Aaronson, foreign investors may turn against the United States for the imposition of tariffs and retaliate by discarding the bonds they have purchased. The result could be a dramatic increase in the cost of borrowing, with the effects falling on the U.S. government, corporations and even American citizens. Learn more about the possible consequences of a “trade war” at www.reddit.com/r/Economics.
According to Aaronson, the main resistance might come from America’s closest trading partners, including Canada, the European Union and Japan. When recommending the imposition of tariffs, Aaronson said that American leaders should first consider who will benefit and who will be harmed by the policy.