The idea that tariffs will balance out trade and create a fairer, more competitive environment is complete nonsense that has been disproved through history. Nobody wins a trade war. The markets know it, too. Each time the talk of tariffs pops up in the news, the markets react – and their reaction is not bullish.
Tariffs couldn’t come at a worse time. For the first time in over a decade, there is great potential for global growth. It has taken many years to get the engines warmed up, but we are finally there. This is important, because wealth will allow countries around the world to pay off some of the enormous debt that has mounted following the devastating financial crisis.
Trade tariffs will have far-reaching effects, but one effect won’t be balanced trade. Global trade may slow down or disappear altogether as markets that were opened up due to free trade agreements are suddenly closed.
Were the terms unfair to the US? I don’t know. I do know that taxes will negatively impact almost every country around the world. Using history as our guide, high tariffs and a trade war will not inspire growth.
So what do we do? Continue to follow the lead of the markets. Read the charts, follow the indicators, and place trade accordingly.
