Consumers, farmers, workers paying for trade war

Bill Knight column for 8-12, 13 or 14, 2019

Compared to good jobs and decent wages, Wall Street going up isn’t great for regular people, and its falling isn’t really bad news either.

The S&P 500 on Thursday surged to its biggest jump in two months, propelled by technology stocks and credited with boosting the Dow Jones up by some 370 points.

However, despite showing continued volatility, it barely affects most of us.

“The top 1 percent of Americans own more than half of stocks and mutual funds,” says Sarah Anderson of the Institute for Policy Studies. “The bottom 90 percent own just 7 percent.”

Nevertheless, the causes BEHIND declines can hurt everyday Americans, whether workers, consumers or farmers.

Earlier last week, stocks plunged in the biggest drop of the year after several moves by China, President Trump’s target in his long trade war and the United States’ biggest trading partner. On Aug. 4 China announced that it will stop purchasing U.S. agricultural products, sales already at their lowest level in a decade.

“This does affect U.S. farmers and the rural U.S. voting base that’s normally in support of Donald Trump,” said Darin Friedrichs, a senior analyst at INTL FCStone. “If they hit back before the election, that’s the obvious way to retaliate.”

The next day, China implied its central bank may let its currency, the yuan, fall to its lowest point in 11 years, following Trump’s threat to impose an additional 10-percent tariff on $300 billion worth of Chinese goods on Sept. 1.

A weaker yuan can help lessen the financial impact U.S. tariffs have on Chinese goods by making them more price-competitive on international markets.

That – along with concerns about a slowing global economy, weak inflation and disappointing corporate profits – alarmed investors even more.

Then then following day, China reversed course, saying it may postpone such action, which it blamed on “market forces,” so a yuan that fell to 7.0562 to the dollar rebounded to 7.0264.

            For consumers, Trump’s new tariffs (on consumer goods such as phones, apparel, shoes, etc.) could cost the typical U.S. household an extra $200 a year, according to Oxford Economics, a global forecasting firm based in the United Kingdom.

            More than 40 percent of all clothing sold in the United States is produced in China, according to the American Apparel & Footwear Association, and some 70 percent of footwear. That may explain the unnerved retail sector, which is seeing hundreds of Kmart, Sears and Walgreens locations closing.

The additional $200 family budgets could have to absorb doesn’t include the more than $800 per year the Federal Reserve says households are now paying as a result of the current 25-percent tariff on mostly industrial products.

China also said it may also retaliate with additional tariffs on U.S. exports.

Technically, the U.S. economy is growing, with a seemingly healthy jobless rate, but Trump’s controversial trade war and the Federal Reserve’s reluctance to commit to several cuts in interest rates worry stockholders.

The next scheduled round of trade negotiations with China is next month.

Hold on.

***

After-thought – The mass-shooting tragedies in El Paso and Dayton and the ongoing misery inflicted on children and immigrants in the name of the American people reminded me of a line by Brooklyn Dodgers executive Branch Rickey (portrayed by Harrison Ford in the film “42”). To rewrite Rickey’s comment to the racist general manager of the Phillies, Herb Pennock: “Someday you’re going to meet God. When He inquires as to why you didn't try to help asylum-seekers and kids detained like dogs, or do something to reduce hate-filled murders of innocent people, and you answer that it's because they were migrants or they were shooters protected by the Constitution, it may not be a sufficient reply!”