The following article was originally published by Michael Snyder at The Economic Collapse Blog. (Used by permission)
By Michael Snyder – May 13, 2019
Wall Street responded to our escalating trade war with China by throwing a bit of a temper tantrum. On Monday the Dow Jones Industrial Average was down 617 points, and that was the worst day for the Dow since January 3rd. But things were even worse for the Nasdaq. It had its worst day since December 4th, and overall the Nasdaq is now down 6.3 percent in just the last six trading sessions. Of course it isn’t just in the United States that stocks are declining. Since last Monday, a total of approximately $3.5 trillion in market cap has been wiped out on global stock markets. And since it doesn’t look like we are going to get any sort of a trade deal any time soon, this could potentially be just the beginning of our problems.
China fired a shot that was heard around the world on Monday when they announced that they would be dramatically raising tariffs on U.S. goods…
China will raise tariffs on $60 billion in U.S. goods in retaliation for the U.S. decision to hike duties on Chinese goods, the Chinese Finance Ministry said Monday.
Beijing will increase tariffs on more than 5,000 products to as high as 25%. Duties on some other goods will increase to 20%. Those rates will rise from either 10% or 5% previously.
According to CNBC, these new tariffs are going to be particularly damaging for U.S. farmers…
The duties in large part target U.S. farmers, who largely supported Trump in 2016 but suffered from previous shots in the Trump administration’s trade war with China. The thousands of products include peanuts, sugar, wheat, chicken and turkey.
When you combine the impact of these Chinese tariffs with the unprecedented flooding that we have seen in the middle of the country, the result is that thousands upon thousands of U.S. farmers are going to be pushed into bankruptcy before the end of 2019.
But China might not stop with just increasing tariffs. According to Global Times Editor in Chief Hu Xijin, China “may stop purchasing US agricultural products” entirely, and the Chinese are also examining “the possibility of dumping US Treasuries”…
China may stop purchasing US agricultural products and energy, reduce Boeing orders and restrict US service trade with China. Many Chinese scholars are discussing the possibility of dumping US Treasuries and how to do it specifically.
As I mentioned yesterday, China literally has hundreds of different ways that they can hurt us.
So the truth is that those that are suggesting that the U.S. will not be hurt by this trade war are just being delusional.
In an article that was posted on Monday, CNBC referred to dumping Treasuries as “China’s nuclear option”…
Consider it China’s nuclear option in the trade war with the U.S. — the ability to start dumping its massive pile of Treasury bonds that could trigger a surge in interest rates and substantially damage the American economy.
As the two sides engage in a tit-for-tat tariff exchange, the possibility that China might raise the stakes and stop being the world’s biggest consumer of U.S. debt again reared its imposing head Monday.
The longer this trade war lasts, the angrier the Chinese will become, and the more damage they will inflict upon our economy.
And without a doubt, this trade war could be more than enough to push us into a new recession. On Monday, Michael Wilson of banking giant Morgan Stanley authored this ominous forecast…
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