Bulletin
Investor Alert

Brett Arends's ROI Archives | Email alerts

May 15, 2019, 10:05 a.m. EDT

The media is lying to you about Trump’s China tariffs

The hysteria must have a political agenda because the amount that’s being charged is peanuts

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Dow Jones Industrial Average (DJIA)
  • X
    Apple Inc. (AAPL)

or Cancel Already have a watchlist? Log In

By Brett Arends, MarketWatch

1 2

Investors panic needlessly

Meanwhile, the total value wiped off U.S. stocks during Monday’s panic was about $700 billion. More than 20 years’ worth of the new tariffs.

Even if Trump slapped 25% taxes on all Chinese imports, it would come to a tax hike of … $135 billion a year. U.S. gross domestic product (GDP) last year: $20.5 trillion.

So even this supposedly scary “escalation” of this “tariff war” would, er, raise our total tax bill from 26.9% of GDP all the way to 27.5% of GDP.

Oh, and isn’t it interesting to see some people’s priorities? Apparently the most shocking part of this trivial tax hike is that it might raise the price of new Apple /zigman2/quotes/202934861/lastsale AAPL +1.67%  iPhones.

Last I checked, these were luxury items, right?

U.S. consumers gain

Meanwhile, the trade spat seems to be bringing down food prices. China is going to take less of our farm products. So wheat prices are down 20% since the start of the year. Soybeans are at 10-year lows.

Good for consumers, right?

No, no, of course not! Silly you. This is also bad news … for farmers!

And all this ignores the much bigger picture, anyway.

The tariffs are simply a means to an end. The president is trying to get China to start buying more of our stuff. He knows the so-called Middle Kingdom, which now has the second-biggest economy in the world, responds to incentives more than to nice words. These tariffs give China an incentive to open up.

OK, so China’s first reaction is just to retaliate. Big deal. That’s just posturing.

Right now we export less to China than we do to Japan, South Korea and Singapore put together. That’s the point. So the effect of China’s new tariffs on the U.S. are yet another rounding error. Even if China banned all imports from the U.S., that would amount to only 0.6% of our gross domestic product. And we’d sell the stuff somewhere else.

Don’t buy the hysteria. President Trump is simply trying to pressure our biggest competitor to buy more American goods. That should be a good thing, even if you don’t like him.

Brett Arends is a columnist for MarketWatch.

/zigman2/quotes/202934861/lastsale
US : U.S.: Nasdaq
$ 244.93
+4.02 +1.67%
Volume: 41.48M
April 2, 2020 4:00p
P/E Ratio
19.34
Dividend Yield
1.26%
Market Cap
$1054.10 billion
Rev. per Employee
$1.98M
loading...

Brett Arends is a MarketWatch columnist. Follow him on Twitter @BrettArends.

1 2
This Story has 0 Comments
Be the first to comment
More News In
Economy & Politics

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.