U.S. China Trade War Explained: How Tariffs Work & Impact the Economy


Investors have no doubt heard about the trade
tensions between the U.S. and China. Both countries are locked in a power struggle as
they impose new tariffs on goods imported into their countries. But determining exactly
what a trade war between the U.S. and China means for the stock market or either country’s
economy, is difficult to predict. To understand its significance, it’s worth taking a closer
look at what the U.S. and China are fighting about and whether or not it should change
your current investing strategy. So, why are the U.S. and China imposing new
tariffs on each other? Back in 2017, the U.S. began looking at China’s trade policies
and decided that the deficit between the amount of goods coming into the U.S. from China compared
to the amount being exported to China was too great. The U.S. government then imposed
billions of dollars in tariffs on some Chinese goods coming into the U.S. In return, China
issued its own round of tariffs on some U.S. imports. The two countries have held talks
trying to resolve trade tensions, but they haven’t resolved it in
any long-term trade solutions. So, why exactly does this trade war matter
to investors? When new tariffs are applied to products, it’s not the countries that actually
pay for them. The companies that sell the products pay the additional costs upfront,
and then they usually pass the expense onto their customers. For example, prices on some
electronics that are manufactured in China and then exported to the U.S. could rise as
a result of the tariffs, which could cause certain device prices to rise. If that happens,
sales from the U.S. tech companies could fall. Not only that, but the higher cost of devices
would likely cause Americans to curb their spending. Rising tariffs on U.S. goods being
exported to China means that companies in that country could increase their prices as
well, and Chinese consumers could suffer in the same way that U.S. consumers are.
China and the U.S. have two of the biggest economies in the world, and the International
Monetary Fund has warned that an all-out trade war between them could hurt the global economy.
Because of this, trade war tensions between the U.S. and China have caused
some volatility in the stock market. But that doesn’t mean that investors should
panic and sell their stocks. The trade negotiations aren’t finished yet, which means that selling
stocks before any trade deals are made is just selling based on fear. Keep in mind that
over the long term, the stock market has produced some strong returns, even in the face of wars,
depressions, recessions, and other negative events. In fact, the current trade war is actually
creating some new investing opportunities. As investors flee the market, it’s pushing
some share prices down and allowing savvy investors to snatch up
companies at bargain prices. There’s still a lot of uncertainty about what
will happen with the U.S. and China trade negotiations, but the one thing that investors
should remember is that for the most part, it’s best to stay the course with their investments
and be on the lookout for bargains. Thanks for watching this video. Don’t forget
to like it and leave a comment below, and click the subscribe button to get more
videos like this from The Motley Fool.

42 thoughts on “U.S. China Trade War Explained: How Tariffs Work & Impact the Economy

  1. Fallen into the trade trap for too long. No short term painful adjustment, no long term solution and only getting worse.

  2. I think the G20 next month can give US and China a good opportunity to do a deal. This war is affecting all the other countries in the G20, so this is going to be one key topic during the meetings. Even if US and China are the biggest economies, they are going to be under pressure to close a deal.
    I think they know that and now they are looking how much certain taxes affect the other, to know how much negotiation potential they will have during the G20.

  3. I cannot watch this video because of the music. So far, under every your videos, comments say the music is too loud/annoying. Maybe you should listen.

  4. What a lousy vid. Kill that stoopid muzak first off. Then re-write the dialog to tell us something we don't already know.

  5. is good for countries around china that could get the companies that will outsource their production there, other companies could also go back to the US , China will loose eventually , the US economy is doing very well and price increased wont affect that much

  6. I note that there is a strong correlation between Trump's actions and the market's fluctuations. Up to the point that I am asking myself wether it could be possible that it takes advantage of these moves. After all, nothing has really been done on the political plateform…

  7. A POTUS is finally taking a stand against the 1/2 trillion $/yr trade imbalance that has been going on for 20+ years. Our economy is doing very well. If not now WHEN? If not Tariffs when what? First round of tariffs were to counter China Tariffs … This round ( delayed 3 times) is more punitive to get the Chinese to the table. American don't need cheep TVs, they need jobs and opportunity for their children. China is devaluing the dollar and taking American jobs, who really wins? China takes intellectual property of companies who set up shop in China then compete. The Communist Chinese are not our friend. They are a creepy business partner who will stab you in the back. WE need a POTUS who will not back down and resolve this issue. Americas future IS at stake.

  8. 0:45 "US spending too much on Imported Goods from China". I think I know what you meant here, but it is a little misleading. The US consumer benefits greatly from cheap Chinese labor and sufficient quality products. The US benefits much more so, on an abstract level than vice versa. You were talking about the ratio of imports to exports? Correct? I don't think its an accurate reflection of the unseen benefits of the US essentially subsidizing their manufacturing labor force with Chinese workers. We get all the goodies, for cheap, and no pollution!

  9. What's to explain away? Trump gave huge tax cuts to his very rich 1% friends and has added a 25% or more sales tax, also called a tariff, on the lower classes who buy cheap Chinese products because we don't have the big money his 1% rich friends have to waste. It's just a massive tax increase on the little people, many of whom are the most stupid ones who voted him into office in the first place. Duhhh…….

  10. This video totally missed the intellectual property theft issue. To me that is the biggest issue we face in dealing with China. No one has had the guts to face the Chinese and call them out on this terrible practice until now. We are doing this from a position of strength and I believe we will win. No more cheap Chinese crap for me.

  11. This is WW3 starting. Note that WW3 will actually be a global economic war and WW4 will be the semi autonomous robot war WW5 could see the end of humanity.

  12. Dude… you completely missed the point of tariffs. They are to promote innovation/production in the USA, not outside of it. Businesses have to invest in the USA, to not deal with tariffs. Nobody has to pass costs onto customers unless they rely on the Chinese slave labor.

  13. I do enjoy the info you have to offer but I also am having trouble concentrating on your info with that annoying music or sounds or whatever it is. The person reading the script sounds like one of those guys trying to sell you his get quick rich program on how he didn't have a penny to his name and then one day before lunch he took 10 cents and turned it into a million dollars.

  14. The music in this YouTube is intrusive and LOUD!! We don't need that kind of sound so PLEASE delete it. JKendziorek

  15. What does David have to say about the Antitrust Probes making these techs drop? Is this noise or is this damaging?

  16. I was so into the video I didn’t realize of the beep on the background, until I started scrolling down the comments and I noticed a lot of this bitches complaining of the beep 😂

  17. Guys please help!
    I am doing a school project on this and want to know which country is the trade war hurting more. Pls could you include valid statistics

  18. Yesterday, CNBC.com article quoting Kyle Bass of Hayman Capital Management, stating US China trade deal will not happen; further suggesting investors change strategy to long term assets, bonds and real estate. Sounds similar to the Dot com .com transition from stocks to fixed income and real estate in the economic cycle. We all then saw how the Mortgage backed securities proliferated into Tranches of Junk being sold fraudulently to investors, banks, and governments resulting in a near collapse of the global economy.

    Instead of shifting our asset allocation, let's shift our Trade Allocation? Why do we need a Trade Agreement? Why trade with Whores? Sleep with whores, become one yourself. So let's develop a long term strategy in reallocating our resources to different trading partners that are not so adversarial? Trump has reformulated trade with the NAFTA and EU countries. Let's move forward and accelerate trade with them.

    Mexico especially. We can kill two birds with one policy with Mexico. Strengthen economic and security ties with Mexico, and in doing so weaken the government, the cartels and at the same time make the people of Mexico more reliant in their strongest and closest trade partner the US. Then when people cross the southern border into Mexico, they will stay in Mexico due to the relative prosperity from their central Latin American country of emigration. In fact the US will make Mexico safe again, due to the persistent use of the US Marines and counter Cartel CIA strike forces similar to JSOC being used in the Central Asian, and North African theaters.

    So lessen significantly over the next decade the trade with China, until the Trade with China is no more than 15% of the US total international trade. Increase the trade with Mexico 30% more than currently over then next decade and increase the trade with Canada 40% and the EU 40%. Initially it will cost the US, but tariff will not weaken China. Less trade will weaken China. Less and persistently lower trade for the remainder of the century and beyond.

  19. This guy who is commentating on this video has zero of experience with economy. Let's make it very simple and short China is a country with huge population and very fast growing economy and producing goods around the globe. Us president with has foolishness decisions will bring us economy to his knee by putting tariffs on goods which are coming from China and the owners of those companies are American so who is paying for those tariffs being put on goods coming from China American off course. Give trump two more years he will destroy american economy but he doesn't care less about american people whether they can pay their rent or pay for their food. Trump wants to be seen as us president that is all what matters to him hahaha what empty head and s loser he is.

  20. This is terrible. To simplify the trade war into jus the trade balance misses the point. The US led China into the WTO and china hasn't played by the rules which has caused a giant deficit. The political nature of the trade war is important otherwise it sounds like we are just upset that they are selling more to us. I expect more from the MF. Disappointing.

  21. Since Russia, China have our worst possible interests in mind, China will let these sanctions slide, until skunk goes, then react.

  22. Your background music is WAY TOO LOUD and annoying …. I can hardly hear what the narrator is saying and could not watch for more than 1 min as it was jarring to my ears …. don't you guys listen to your own videos before uploading them????

Leave a Reply

Your email address will not be published. Required fields are marked *