Money Advice

'Trade spat' still getting all the attention

Posted by The Simply Money Advisors Team on Apr 9, 2018 11:51:45 AM

This week's economic calendar is relatively light, and the corporate earnings season doesn't get into full swing until next week, so Wall Street is likely to once again focus the U.S.-China trade spat.

Last week, President Trump asked the Office of the U.S. Trade Representative to consider additional tariffs (tax) on $100 billion of Chinese imports. China responded by stating that if the U.S. follows through with that, China will retaliate.

Additionally, China is now considering devaluing their currency to make their exports cheaper. However, if China did this, the country would be attacking other countries besides the U.S. It would also be very costly to China since it would have to dip into its reserves to pay for it.

If this trade spat morphs into a trade war, China would be hurt more financially; the U.S. imports $505 billion (21%) of all China's exports. With U.S. midterm elections coming up though, China may have the political will to last longer.

Economic data fell short of expectations last week. The jobs report showed the economy added only 103,000 jobs in March compared to the 185,000 new jobs economists forecasted.

This was the fewest jobs added in six months, and mostly due to a slowdown in hiring for service jobs and construction jobs.

Meanwhile, the unemployment rate was unchanged at 4.1% and hourly wages were just 2.7% higher over the past year. This helps keep inflation concerns contained.

If inflation remains muted, the Federal Reserve (Fed), our nation’s central bank, has little reason to aggressively raise short-term interest rates. Last week, Fed Chair Powell said he backs further gradual increases in rates. We expect two more rate hikes in 2018, including one in June.

The Simply Money Point

While the headlines will be about the trade spat, pay attention to the growing economy (likely close to 3% in 2018) and your personalized financial plan.

At Simply Money Advisors, we eventually expect a resolution to this trade spat just like there was with the steel and aluminum tariffs, as almost all our allies received exclusions.

Topics: Economy

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