As The Trade War Escalates, Companies Brace Themselves

Image Credit: Nikkei Asian Review

After trade talks fell through again last Friday, the trade war between the US and China proceeded to pick up pace again.

Tariffs were increased on $200 billion worth of Chinese goods, and China hit back with tariffs on $60 billion worth of US goods. The result of this escalation has been an immediate and strong reaction on stock markets across the globe, some of which have seen their worst falls in months. The Dow Jones, S&P, and Nasdaq have been hit hard and would need quite a push to recover.

Retailers in the US rely heavily on Chinese manufacturing, so the retail sector is one where people have started to take notice. Walmart and Macy’s are telling investors that the time to panic is not here yet. Macy’s warned investors that these new tariffs will certainly hurt new businesses, but the duties can be “mitigated.” Walmart, on the other hand, does rely on marketing and providing lower costs to consumers, and they have already admitted that costs will increase.

The real question for many other companies is whether or not more tariffs are in the mail. US trade representative Robert Lighthizer announced that the US is currently in the process of expanding tariffs to the remaining Chinese imports, which the White House reports are valued at $300 billion. The potential for a fourth round of tariffs has raised eyebrows, as there would be a strong potential that earnings would stop growing. This would be particularly bad for major retailers, who may be forced to think hard about whether they want to remain in China or not. Some US companies that sell to Huawei could also be affected negatively.

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