Markets reacted sharply to the escalating trade war situation this week as it has claimed its first victims and, so far, the list contains mostly American companies and their economic growth.
If we had to talk about a single point this week, it would be the real GDP as it only grew by 2.0% in Q1. While Harley-Davidson’s decision to start manufacturing motorbikes in Europe made headlines, the ongoing trade war showed how broad the implications are as Soybean futures prices fell to the lowest level since the beginning of the year, and shipping companies like Maersk and MSC announced that they are suspending their Asia to Pacific Northwest route from July.
There was some upbeat news from the housing market as the supply of new units finally caused home prices to come down a bit. However, consumer confidence fell, once again, thanks to the Sino-U.S. trade war.
To sum up, we are starting to get a clear picture of why economists dread tariffs and claim that trade wars usually backfire. While steel stocks are gaining momentum, a number of American companies have started to feel the heat and the effects of import tariffs in the U.S. and retaliatory tariffs from trading partners will only weaken the American economy as we continue to go down the rabbit hole.
Be sure to check out our previous week’s edition here, in which investors focused on a fresh set of tariffs that reignited the trade war.