On Friday the US decided to implement the tariffs on $50 billion products from China. The effects of such step are being discussed by economists and analysts from Wall Street. The next move belongs to China, which can choose a path of counterstrike. In case the trade conflict between the two countries gets worse, it could affect numerous businesses and workers.
How will China react?
China’s decision to counterattack could result in a price inflation, but even more dangerous for consumers would be the slowing down of the economy. This could hit their pockets, not to mention that many of them could lose their jobs and have problems with finding new ones. The good effect the tax cuts have on the economy could also be halted.
$50 billion is not much for the US economy
Considering the size of the US economy, precisely $18 trillion at the moment, the tariffs of $50 billion are relatively tiny. Their effect on the annual US economic growth would be a decrease of at most a tenth of a percentage point and a similar rise of consumer prices. Only about 6% of the consumer price index comes from the imported purchases and with the unemployment rate of just 3.8% it is unlikely that the tariffs will have a big impact on the consumer.
The tariffs are divided into two lists: the first one consists of mostly ”industrially significant technologies” and covers about $34 billion of the Chinese products, while the second one, still under review, amounts to the remaining $16 billion.
Since the products included in the first list are necessary in the process of creating finished goods, production costs will go up and that means that the prices of goods will most likely raise. That in turn can badly affect the consumer spending.