How will stock market be affected due to the trade war among US and China?

Preeti Taneja

Entrepreneur | Posted on 19-Jun-2018

We saw (and learned) in 1930 when trade war between several countries happened on a mass scale. They wanted to decrease their trade deficit but what happened was a massive economic slowdown globally which spanned into what we know as The Great Depression. So, after that, I think we have learned that increasing tariffs to improve trade deficit is the very least appealing option.

What we’re seeing right now is misjudgment and irresponsible decision on US President Donald Trump’s part (frankly, we shouldn’t be expecting much from him anyway). In March 2018, he signed an order imposing 25 percent tariff on steel imports and 10 percent tariff on aluminum imports, citing some absurd “national security” as the reason behind the move. And a few days ago he announced tariffs on $50 billion worth of Chinese goods. On Tuesday, after Mr. Trump threatened China with a further $200bn in tariffs, increasing fears that a long-simmering spat between the two countries risks turning into a damaging trade war. The Asian stock market tumbled and Europe opened lower. The decision hit many exporting countries—China being the worst. The Asian country, much to everyone’s expectation, retaliated with its own immediate-effect tariff tuning to $3 billion. Honestly, this situation looks quite nasty.

India, too, has been hit by the tariff imposed on aluminum and steel by US President Donald Trump. And surprisingly, India has hit back by imposing import tariffs of its own on 30 items which amount to $240 million. So, yes, it’s not just USA and China, it is other countries too. And as the day passes and nations start seeing the adverse effect, we would see a rollback of these tariffs.

As for how this turmoil will affect the global stock exchange - there would be an immediate impact. Yes, the nations who depend on the USA the most will be the most affected. Inflation can rise, which would hit their stock market hard. China stock market is nearly 2 year low, Pound is hitting seven month low, Asian tech firms who supply components to Apple have been hit hard today, due to fears that a trade war would hurt demand.