Trade Wars Might Be Back

Trade Wars Might Be Back

over 3 years ago2 mins

We’ve been here before: the US government is gearing up to levy fresh import taxes – a.k.a. tariffs – on $3.1 billion worth of European and UK products, adding to its beef with Canadian aluminum ⚔️

What does this mean?

Tariffs increase the cost of getting products across international borders and therefore tend to reduce demand for them – likely leading to lower economic growth. Of course, those products that are imported with higher duties will net the importing government proportionally more cash, and local producers may also benefit from more business. One major reason tariffs are used, after all, is to tilt the balance of how much economies spend on each other’s stuff ⚖️

The products the US is planning to target starting late next month include handbags, leather, olives, and gin – while it may also hike existing tariffs on the likes of aircraft and dairy products. Europe’s response remains to be seen 🇪🇺

Why should I care?

Stocks fell everywhere on Wednesday. While the effects of any new tariffs may be negligible compared to the economic destruction done by coronavirus, investors in at-risk companies sold off shares in a bid to avoid additional financial damage. Among the biggest fallers was French luxury conglomerate LVMH – which makes, er, bags, leather goods, and spirits – and British spirit magnate Diageo, owner of the globe’s best-selling gin 🍸 Their products stand to become more expensive in the world’s largest economy, which could lead to lower earnings.

Daily Brief Image

Importers of potentially soon-to-be tariffed goods may be caught between a rock and a hard place. They’re faced with either absorbing higher costs and reducing their own profits – which, given the pandemic, many companies can’t afford to do – or else attempting to pass the buck to customers whose finances are unlikely to be much healthier 🤷‍♀️ That risks would-be clients walking away – or worse, wandering into the arms of rivals that can afford to avoid immediately increasing prices.

Daily Brief Image
Finimize

BECOME A SMARTER INVESTOR

All the daily investing news and insights you need in one subscription.

Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.

/3 Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.

Finimize
© Finimize Ltd. 2023. 10328011. 280 Bishopsgate, London, EC2M 4AG