May Topic: In A Trade War: China Versus America

Updated: May 27, 2019

Donald Trump might not seem that bad. He did, of course, stop the Qualcomm-Broadcom buyout. (The purpose of the buyout was very controversial, as the movement of Broadcom was to move fast and make profit, while Qualcomm was more worried about long term investment. Broadcom had wanted to buy Qualcomm, as the Singapore-based company wanted to move to the United States. It seemed to be a bittersweet deal, and was on the verge of passing. Everyone was invested in the ending of the merger, which fortunately, was blocked by our current administration, saving a few million jobs and perhaps stagnating growth. As we all know, Qualcomm is in sort of a slump.) But despite business woes and disappointment, as well as thankful blessings, these days, all we can expect is the unexpected from the man who is in office. 

But besides worrying about our president, many people have been thinking about something more monetary than political, the stock market. Right now, it’s on the rise, but yesterday, it fell to 24229.12 dollars.

The stock market really has been volatile lately, sparked, perhaps, because of our new president and his ability to upset nearly everyone and everything. The scare that dropped the stocks in the beginning of the year wasn’t the bell of a recession, but it showcased what exactly the president can do in terms of messing up the economy. China, of course, has seized the opportunity, and a trade war seems to be on the horizon. Meanwhile, our administration is being investigated for collusion and mismanagement. Stocks have been falling, and a market that used to be positive is now losing almost all the gains it had made. Based on the recent news from China, heavy concessions must be made to avert a full out trade war. Part of the reason as to why there was no agreement was the fact that both sides wanted hard changes. The United States wanted China to stop extorting electronics information from U.S. businesses, as well as an evening out the deficit of import to export. China on the other hand, wanted America to stop investigating their practices, to allow chinese companies to work freely in the United States (Huawei, for one),  and hand over more free reins in business. Neither side conceded. 

Stepping away from the meeting, both parties had shown no progress, and the public only grows more worried as fears about financial insecurity grow. 

With Trump as president, we have nearly no clue as to what is going on. However, one thing that we do know is that China exports more to the U.S than the United States of America does to China. Our importation and exportation has fluctuated and changed, as you can see here. Our country has a deficit of trillions each year, money which most often pours into China. Our exports are much lower, and according to the theory of mercantilism, our country will eventually putter out if we continue on this path.  Of course, the annual deficiency of exports and imports from the United States of America to China has varied, and this would benefit us in a trade war. We would probably win the trade war, but the United States of America would suffer extremely high losses if China decided to levy embargoes, as our dairy, poultry, and electronics markets are invested heavily there, and the stock market would likely drop to the pits. A trade war would devastate China, of course, and their markets would probably deflate or implode. A trade war, however, seems unlikely, as both parties should understand the futility and terror it would bring. 

For an investor, the best thing to do is wait and watch carefully for more news. Less pricey, less mainstream stocks are much safer, and change high volatility stocks for more steady, less famous businesses which return more in the long run anyways. Housing prices should be watched carefully, and retirement funds not over invested in stocks. 

May 1, 2019