Odds are, you’ve heard people talking about the current trade war between the United States and China. Most people understand it as “things will cost more,” but the reality might be far more severe than that.
Trade wars are a lose-lose situation. Financial services company Seeking Alpha believes that our current strong-arming with China is foolish. When goods are used as a bargaining chip, your economy takes the brunt of the damage. This means that instead of punishing the other country with higher tariffs, you’re pushing that tax increase onto local consumers. China isn’t paying 40% more on steel, but American citizens are.
This hasn’t just been with China, either. Various European countries have been feeling the effects of the ongoing trade struggle. Even as small changes, they compound into a large pile of tariffs that will offset the entirety of last year’s tax stimulus.
All of this is even more of a concern given our current leaders. Neither the Chinese president, nor the U.S. president has shown any intention of toning things down. This means the potential for even higher tariffs remains rather high. What 40% is now may become 80% or even 120% in the following years. These battles have been especially focused on automobiles as well, given their international trade popularity. Imagine a Volvo S90 costing $110,000 instead of the currently priced $63,650.
The biggest problem is that international negotiations like this are managed on a top-level. This means we as citizens can’t simply vote to end these tariffs. All we can do is watch as it happens.