US-China Trade War
Is it Working?
As the tariffs kick into high gear, demand for Chinese imports keeps rising. One would think as tariffs are paid and prices for consumer goods increases, demand for Chinese imports may slide downward. This does not appear to be the case. As reported, China’s surplus hit its’ highest point in 2018 as the trade deficit grew to $323.32 billion, compared to 2017’s deficit $275.81 billion. That represents an 11.3 % growth from to 2017 to 2018.
As much pressure as the Trump administration has applied to China, in an attempt, to get them to import more American goods, exports to China only rose by .7%. Yes, that’s correct, less than 1 % point. If the Trump administrations true goal is to balance the trade deficit, the approach does not appear to be working.
American’s consumer appetite for Chinese imports is at an all time high. It would appear the consumer is willing to shoulder the cost of the trade war by paying higher prices at the register for those items. Obviously, we are still in the beginning stages of the war, I know it seems like its been going on forever however it’s only been about 9 months. Tariff collection for the US was at an all time high in October. As retailers ramped up stock for the Christmas holiday, they imported goods for the sales. Time will tell if the consumer will continue to pay higher prices or if the holiday drove the imports to all time highs. As each month roles on, more and more disposable income will be eaten up by inflation caused by the passing on of tariffs paid by wholesales and importers. This could have a bigger effect on the economy come summer if the trade war is still being waged. April will give us a full quarter, with no holidays, and the tariffs in full affect.