DOW Jones Index Tumbles on Trade Tensions

Tuesday, May 29, was an incredibly volatile day on Wall Street. The Dow Jones Industrial Average dropped more than 392 points. This precipitous drop was caused by two main factors: political issues roiling Italy and the ongoing trade war between the United States and China that has been largely stoked by current US President Donald Trump.


The Dow dropped 1.6 percent or 292 points on Tuesday. In addition, the S&P 500 and Nasdaq both suffered significant losses by the close of trading on Tuesday. There are a number of different factors impacting markets and leading to this new volatility.


The most current threat to the economic order is the fact that Italy will be holding elections soon. The populist party in Italy is seen as hostile to EU projects which could mean massive problems with governing the body. Outside investors are worried about Italian debt and are currently hiking interest rates for the Italian government.


While these issues started in Italy and Europe they spread to the US almost immediately. One major worry of Wall Street is that Italy will eventually leave the European Union. Since Italy is currently the third biggest economy in the EU this would be a catastrophic blow for the continent-wide program. At one point Italy leaving the Euro seemed like a fantasy, but Brexit has financial markets across the globe worried.


Another major source of worry for markets is the fact that the administration of President Donald Trump announced new 25% tariffs on 50+ billion dollars worth of goods coming from China. This goes against statements made by his treasury secretary earlier in the month that the trade war with China was “put on hold”.

The Trump Administration Wants China To Cut The Trade Deficit by Sixty Percent Over The Next Two Years

President Trump is playing with economic fire, and he thinks he’s not going to get burned. Last week, the Trump administration sent an economic delegation to China to make a deal. His trade sanctions started an economic sparing match, and that’s not good news for American consumers. The delegation wants China to reduce the trade deficit by $200 billion over the next two years. The trade deficit was $336 billion in 2017. And the U.S. delegation also asked China to stop taking U.S. intellectual property from the U.S. companies who sell that property in China. If China does what Trump wants, he will take away his tariff threat. That threat impacts about $50 billion worth of Chinese goods.

That sounds like an economic hardball at its finest, according to a article. The head of the White House National Trade Council, Peter Navarro, is in charge of the negotiations. Navarro is not as cooperative and he is not as fair when it comes to negotiating as Larry Kudlow, Trump’s top economic advisor. The Chinese rejected Navarro’s offer. According to associate director of the Cato Institute’s Center of Trade Policy Studies, Simon Lester the delegation knew the Chinese would reject a deal like that.

Lester thinks the Trump administration is putting on a show so the Chinese will turn down the offer and Trump will enforce his tariff plan. There’s a big difference between what China will do and what the U.S. wants from China. And the Chinese are not backing down. A trade war with China will fuel inflation in the U.S., according to some economists and U.S. consumers will pay a heavy price for wanting to buy China products that other countries can’t produce.

Officials from US and China Meet to Smooth Over Trade Issues

After months of back and forth and threats from both sides, representatives in China and the United States are meeting this week to discuss strategies to avoid a brewing trade war between the two countries. The US delegation arrived in Beijing on Thursday for two days of talks in an effort to smooth things over between the world’s two largest economies. President Donald Trump sent two his top advisers to the negotiations, choosing Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer.

Earlier this year, Trump threatened a series of tariffs on imported Chinese goods and China responded with of list of their own tariffs equalling billion of dollars on both sides. In addition to deescalating tensions, the US delegation hopes to make progress in a few other key areas. US officials are hoping to convince China to buy more US goods in an effort to cut the $375 billion deficit. The goal of the talks is to come out of the deal with an agreement by China to purchase an additional $50 billion worth of goods per year. The US also hopes to gain access to more foreign markets through negotiations with China. Lastly, American companies operating in China want Trump to pressure the Chinese government to do more to protect the integrity of their intellectual property. Trump has previously cited this theft and counterfeiting of goods as a major reason for imposing the tariffs.

Brazil Wants Free Trade

Although the economy of Brazil isn’t the greatest in the world – quite literally – it’s still significant, considering that the nation is so large, but more importantly because it is home to more people than any other country on planet Earth, with the exceptions of China, India, the United States, and Thailand.

According to Eduardo Guardia, the finance chief of the nation of Brazil, the nation is against protectionism, or policies in countries that keep their own goods for themselves, rather than trading them throughout the globalized world at large.

Mr. Guardi said in an interview with CNBC, “Brazil wants to become a more open economy,” which roughly translated, in terms of practicality, that the nation’s financial leaders, including all those within the ranks of Brazil, that the nation wants to import more goods and from outside of its orders, as well as export raw materials, commodities, and other indirect sources of economic activity poured back into Brazil, rather than kept within its own barriers.

Such sharing cam about at the International Money Fund Spring Meetings in 2018, which was held in none other than the great ol’ United States, in its capital city of Washington, D.C.

Despite the fact that the economy of Brazil will certainly reap the benefits of the trade war that’s going on between the United States and China, as both of the countries will go to Brazil for business, the nation is clear about its thinking that free trade is the way to go in terms of economic success.

Trade Secretary Mnuchin Hopes To Resolve Potential Trade War ASAP

If you’re not already sure of what trade deficits are, or are simply always down for a quick refresher of information, an example of a trade deficit is as follows:

If the United States ships out $10 worth of goods to China, and China ships $12 to the U.S., the former country is in a trade deficit of $2, whereas China would have a trade surplus of $2. Neither country owes one another anything – trade deficits simply indicate how much economic output a country is responsible for.

The United States has a huge trade deficit with none other than the world’s most populated country, China, which is one reason why President Donald Trump hit goods coming from the country into the United States with excessive tariffs, collectively covering more than one thousand individual products.

According to Steve Mnuchin, the Secretary of the United States Treasury, he believes that trade tensions could soon resolve between the United States of America, China, and any other countries that currently are owed money in terms of trade deficit.

Such remarks by Mr. Mnuchin come just shortly after meeting with some of the highest-ranking, most popular leaders that have to deal with trade in between countries, all of which hailed from China, Japan, and various countries throughout the world.

According to historical analysis, the current trade war that China and the United States are effectively already entered into is the largest since since World War II, with each imposing trade barriers to the rune of $50 billion each.

Escalating Trade War with China Could Put U.S. Companies at Risk

The brewing trade war between the United States and China is showing no signs of slowing down, putting many U.S. companies at risk. Over the past week, the two countries have seen tensions escalate as more tariffs are announced on each side. As the dust settles, experts believe it will be interesting to see which country has more at stake in the growing conflict. China faces greater challenges in the goods sector, as it ships over $500 billion in products to the U.S. annually, as opposed to only $130 billion in products shipped to China from the U.S. However, although the U.S. would likely win the battle of material products, the Chinese have the upper hand when it comes to travel and hitting U.S. companies looking to expand and grow their business on Chinese soil.

The Chinese spend a dizzying amount of money on travel to the U.S., including a significant amount directed toward U.S. college and universities for educational expenses. Those costs are not reciprocated by the U.S., putting the U.S. more at risk of loss in this category. Chinese officials can also make it more difficult for U.S. corporations to expand and operate in China, which would greatly hinder the development of many American companies. As evident when examining past relations with South Korea, the Chinese have not shied away from flexing their trade dollar muscles when imposing sanctions on tourism and toward foreign companies operating on their turf.

China Confident It Can Win Trade War With the United States

United States President Donald Trump has announced in recent weeks that his administration will impose tariffs on steel and aluminum coming from China and some other countries. In addition to these tariffs, President Trump announced that he may add tariffs to another $50 billion dollars in goods. On top of that, the president two days ago said the as much as $100 billion in Chinese goods may be hit with tariffs.

The Chinese government was quick to respond. Tariffs on United States products were quickly announced. The Chinese government stated that they did not want to get into a trade war with the United States. However, the government stated that they would fight and win a trade war if that is what was necessary.

The question that many economists are asking is if China could win a trade war with the United States. Most economists clearly believe that there are no real winners in a trade war. They also believe that China is positioned to withstand a trade dispute better than the United States.

China has a government-controlled economy. It has the ability to control prices so that the general public would never see any price increases due to tariffs.

China also has one important weapon in its trade war arsenal. China is one of the largest importers of US agricultural products. It is possible that China could decide to place large tariffs on soybeans from the United States. This would harm farmers in the Midwest who are critical for President Trump’s reelection.

Trade War with China Sparks

Over the past few decades, the overall international economy has become far more globalized than ever before. Today, even countries that are not necessarily on the same footing when it comes to a variety of different social and political issues manage to find a way to engage in trade. Because of this, maintaining a proper balance in international trade is extremely important. While the United States and China have done a good job of maintaining a good trade relationship for a long time, it has gone through a lot of strain over the past few weeks (

Over the past few weeks, president Donald Trump has made a variety of different claims discussing tariffs that he would like to place on China for imports. These tariffs have ranged significantly and in some cases are estimated to be as high as 50% for certain goods. While he has reportedly done this to try and encourage people to buy American products, it has been very damaging to the trade relationship with China.

Now that China has had a chance to consider the tariffs that the United States is placing on Chinese imports, China is also considering placing tariffs on items at the United States exports. Overall, China is considering placing a 25% global tariff on all items that are imported from the United States. This impact could have a major affect on a wide variety of companies and could shake up the entire global economy. Since these claims, global stock markets have fallen considerably.

Trade War Looks Likely Between China And US

A tense stand-off on trade is happening between President Donald Trump of the United States and China. The President is looking to impose an additional $100 billion tariff on China in addition to the $50 billion that are already imposed on these tariffs. China is not pleased and they are looking to go tit-for-tat in this trade war.

China wasn’t pleased when President Trump first announced new tariffs on Chinese imports entering the United States. An additional $100 billion is no small number, but China responded quickly stating that they would have no hesitation paying any price necessary for them to defend their interests. China went on to state that as to major world powers, the two countries should treat each other with respect and equality, they believe that President Trump has picked the wrong target to mess with. While China has no interest in fighting, they do not fear a trade war with the United States. The risks of a trade war between these two countries would have massive global impacts. In Asia, the market showed no reaction to the trade spat while Hong Kong’s market rose roughly 1% and Japans market edged lower.

It all began when the US announced a 25% tax on steel and a 10% tax on aluminum. This affects multiple countries, but China was one of them. China, in response, imposed their own $3 billion tariffs on a range of goods the US imports including wine and pork. In return, the US then imposed about $50 million in tariffs on Chinese-made items which was met with $50 billion in Chinese tariffs on 106 different key US products. Now, the US is considering adding the additional $100 billion in tariffs as their next move.

It seems that the impact will be big and will affect many countries. At the moment, the Republican Party is cold to the tariffs fearing that it will cost many American jobs and hurt the economy as well as other trading partners. For example, the United States is a huge exporter of soybeans and China purchases 60% of those exports. The tariffs will cut down the need for those exports which will hurt American farmers and the American economy. China would then need a new supplier for the soybeans which would likely be from India who is a huge producer of the product. This would boost their economy greatly while the US suffers. Should China purchase from India or even Argentina or Brazil they would likely pay higher prices which would force the price of other products up causing a major inflation problem.

For now, a complaint from China has been lodged at the World Trade Organization (WHO) over the tariffs and it is scheduled to be heard in May. It could be months before any decision is made, but for now, it looks as though there could be some economic issues that arise as the two countries continue to disagree. For more details on this topic, click here.

China Tries to Calm Trade Tensions with Washington

Trade tension between China and the United States is growing. Trump administration officials are increasingly expressing their criticism of China’s trade policies. China is sending Liu He, the country’s top economic policymaker, to Washington this week to smooth tensions between the two countries. Liu is making this trip before China’s congress conducts its annual meeting. Liu is expected to be named the next vice premier for financial and industrial policy for China at this meeting.

The Trump Administration and the Commerce Department both view steel and aluminum imports from countries like China as a national security threat. This is because China and a few other countries implement higher tariffs on their imports of American products than the U.S. imposes tariffs on the imports of products from these countries. President Trump and the Commerce Department are looking at ways to restrict these and other imports through higher tariffs. The Chinese government would prefer the status quo, but they are also ready for a trade confrontation.

In early February, the Chinese government sent its top diplomat Yang Jiechi to Washington to maintain the status quo and soothe the concerns in Washington. Nothing significant was accomplished with this visit. The Trump administration was already too focused on China’s military buildup and China’s growing trade surplus with the U.S. The large delegation Liu is expected to lead is an indication of Liu’s growing influence within the Chinese government. Experts believe Liu will eventually be the head of China’s central bank after the current central bank leader retires later this year.