Here’s how a trade war between U.S. and China could get ugly

Bloomberg/Andrew Mayeda and Jenny Leonard/7-8-2018

“Economists feel they have a good handle on the direct impact of higher duties. Tariffs raise the price of imported goods, in turn inflating costs for businesses. Those companies can fully absorb the increased cost, or pass some or all of it onto consumers. The bottom line: someone pays, prices rise, demand is hurt.”

USAGOLD note:  In other words, the effects are likely to creep up on us.  This week the government will release its reports on producer prices and consumer prices.  Though it is probably too early for the tariffs to affect these reports, investors are likely to see any signs of rising inflation as a trend to which the cost of tariffs will need to be added.  We need to keep in mind that cheap imports have been the chief contributor to low inflation in the United States for at least over a decade – going all the way back to Greenspan’s tenure as Fed chairman. Companies, by the way, will pass along the rising costs.  They will have no choice especially in this era of razor thin margins for retailers as well as wholesalers.

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