UNITED STATES—Two of the biggest trading nations China and the US is caught up in an ongoing trade war. Each of the countries has imposed tariffs on the various goods that are traded between the two nations. Donald Trump has targeted around $50 billion worth of China imports with 10 percent tariff. Even the goods that are sold on Dhgate which is one of the biggest Chinese online shopping sites is also being targeted by the President.
If China retaliates back then the President is said to target around $200 billion worth of Chinese imports which is actually four times the initial target. It is not sure that whether this ongoing trade war between China and the US is going to turn into a full-scale trade war or not but it can be said that it is not helping any of the countries in any way. In fact, there are disadvantages that the US should be aware of. Now let’s have a look into the disadvantages that can be faced by the Americas as a result of this trade war.
What are the main disadvantages of the Sino-US trade war?
Some of the main disadvantages that cannot be overlooked include the following:
- The increased cost of everyday products: A full-scale trade war could have a great impact on the Americans in several ways. For instance, the prices of everyday goods could increase. The tariffs placed on the imported products are likely to be passed on to the customers. This is true in the sense as the US is known to import quite a lot of goods from China which include clothing, toys, electronics etc. These are only some of the products to be named.
- Inflation could lead to higher rates of interest: If inflation in the US goes up due to higher prices of the products then it is possible that the Federal Reserve will increase the rates of interests faster than normal. This will eventually increase the cost of taking loans for all the US customers. This is because the bank rates would even follow the same rise as decided by the Federal Reserve.
- Credit card interests would increase: One of the direct impacts of the higher rates of interests by the Federal Reserve would be seen in the increase in the interest rate of credit cards. That’s because the interest rate of credit cards is usually derived from the prime rate which is directly connected to the funds rate of the Federal Reserve.
- Stocks would suffer: Higher costs of products, higher rates of interests and reduced rate of economic activity would have a direct impact on the US stock market. if there is a full-blown war trade between the US and China then there is a complete possibility that the US stock market will suffer.
Thus, you can see the number of dangerous disadvantages that the Americans can suffer if there rises a full-scale trade war between these two nations.