The decade-old U.S. bull market has been threatened by renewed trade fight lately. Escalation in tit-for-tat tariffs between the United States and China has shaken the Wall Street once again, resulting in global growth concerns.
President Donald Trump raised tariffs on Chinese goods worth $200 billion and China retaliated with as much as 25% tariff on $60 billion worth of U.S. imports effective Jun 1. Trump also threatened to blacklist Chinese firm Huawei Technologies, forbidding it from doing business with American companies. China might hit back by restricting rare-earth exports to the United States (read: Trade War Drags On: Time to Buy Bond ETFs?).
Additionally, the Trump administration threatened to slap tariffs on all goods coming from Mexico in a bid to curb illegal immigration. Washington will impose a 5% tariff from Jun 10 that will increase to 10% on Jul 1 if illegal immigration across the southern border was not stopped. Levies will then rise by 5% each month up to 25% by Oct 1. The tariff will permanently remain at the 25% level unless and until the crisis stops. The move will hit a number of companies especially in the auto sector. This is because American carmakers have built vehicles in Mexico for years, taking advantage of its cheap labor, trade deals and proximity to the United States.
The rounds of increase in tariffs will hurt U.S. consumers, driving up the prices of goods and thus curtailing spending. It will further impact worldwide economy and corporate profits, particularly at big U.S. exporters. All these will continue to weigh on the stock market. Investors could ride out the downbeat sentiments through inverse or leveraged inverse ETFs as these products offer big gains in a short span.
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