Chinese Checkers - The Tariff Edition (Part 1)

By now you don't have to be more than a casual observer of news to know that we're in some type of potential trade war with China. But what's happened and what does it mean to you? Here's the easy to understand version based on my analysis. 

Phase one - the solar tariffs: 

  • January 22nd - President Trump signed a 30% tariff on imported Asian solar 

What's the impact been after two+ months? If anything, positive. The only measure result to date is that the largest manufacturing of Chinese solar, Jinko solar, announced and is in the process of opening a new manufacturing facility in Jacksonville, Florida. There wasn't retaliation by any foreign country.  

Phase two - the steel and aluminum tariffs: 

  • March 8th - President Trump introduced a 10% tariff on imported aluminum and a 25% tariff on imported steel 

What's the impact here after two plus weeks? A lot of barking by trade partners (Canada our largest trade partner for these metals was excluded for now along with Mexico - the fourth largest) and increased volatility in commodity prices for steel and aluminum but no retaliatory response until Friday. More on that in a moment. 

Phase three - the Chinese tariff: 

  • March 22nd 60 billion per year worth of Chinese stuff (aerospace, information technology and machinery being the most targeted) hit with a 25% tariff as the administration aimed to cut down on the trade deficit with China 

Here's where it becomes a bit more complicated. China did seemingly respond to this announcement with their own retaliation but not really... On Friday China released a list of 128 different American products that could be subjected to tariffs along with imposing a tariff on $3 billion worth of American imports focused on aluminum pipes, pork, steel and wine. But here's the thing. The Chinese government didn't put that altogether inside of 12 hours. They had considered it and were ready to announce the tariffs if/when President Trump issued additional tariffs. When he did - they acted and also said that this was in response to the first two rounds of tariffs - not the latest round - holding open the possibility that much more could be coming. So, what's likely going on here? 

My read is that the Chinese government drew a line in the sand on Friday. The tariffs they announced impact only about 2.7% of all US goods imported by China. Hardly a big deal despite much of the noise in the media. I think two things are happening. One could be really positive, and one could be a reason for concern. I'll cover those in the second part of today's story. 

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