How a Trade War Could Impact Employment in the U.S.
Another round of proposed tariffs, another market meltdown. That seemed to be the theme of the day...and the week.
On Friday, the Dow Industrials, the S&P 500, and the Nasdaq all fell by more than two percent, capping off another down week.
The latest declines came on the heels of President Trump saying he’s considering tariffs on an additional $100 billion worth of Chinese goods as a response to that country’s “unfair retaliation” to his initial tax proposal.
Comments from Secretary of Treasury Steve Mnuchin acknowledging the possibility of a trade war suggested that, this time, there may be real consequences to Trump’s proposal.
“This runs the risk of overplaying his hand,” said Clayton Allen, Vice President, Special Situations at Height Capital Management.
“This is a fear that’s possibly driven more by the concept of the worst possible outcome rather than by the realistic expectation of where this goes over the next three months.”
Another factor that pressured markets was the March jobs report, which showed the U.S. economy far fewer jobs last month than expected.
And if a trade war between the U.S. and China were to escalate, more jobs could be on the line, said Allen.
“Companies in the U.S. that...build things out of components shipped from China would...have a less competitive advantage if the price of those shipments goes up.”
Apple CEO Tim Cook said Thursday that the majority of iPhones sold in the U.S. in the current fiscal quarter will be sourced from India, while iPads and other devices will come from Vietnam as the company works to avoid the impact of President Trump’s tariffs on its business. Apple’s earnings for the first three months of the year topped Wall Street’s expectations thanks to high demand for its iPhones, and the company said tariffs had a limited effect on the fiscal second quarter’s results. Cook added that for the current quarter, assuming things don’t change, Apple expects to see $900 million added to its costs as a result of the tariffs.
