Home Asia China US Not Likely to Suffer Big Damage From China Trade Dispute

US Not Likely to Suffer Big Damage From China Trade Dispute



FLASH: Major averages traded lower on trade uncertainty,
Several US companies suspend business operations with China’s Huawei Technologies, Semiconductor stocks underperform, drag the S&P 500 information technology sector and Nasdaq lower

Trade tensions with China need to linger for an extended period to cause real damage to the United States economy, St. Louis Fed President James Bullard said in remarks published Monday.

Engaged in a lengthy trade standoff, the United States and China have raised tariffs on a range of goods, raising fears that their conflict would develop into a trade war, damaging the global economy and worsening its recent growth wobble.

“I think the US is such a big and diversified economy that the impact compared to the size of the entire economy would be relatively small,” Mr.Bullard, a voting member of the Federal Open Market Committee (FOMC), was quoted as saying in the online edition of Handelsblatt.

“In order to do real damage to the US it would have to go on for some time.”

Mr. Bullard added that this trade conflict appears to get more attention outside the United States because the conflict may disturb trade patterns and slow investment outside the US, particularly in the case of small, open and trade-reliant economies.

“For them it can be very damaging, if the trade network is upset or even threatening to be upset. Smaller countries are caught in the crossfire,” Mr. Bullard added.

Economist Mohamed El-Erian predicts President Trump stands a chance of creating a new economic world order in his China trade fight.

“I think we should not underestimate something ‘Reaganesque,’” the chief economic adviser of Allianz said Monday. President Ronald Reagan was able to change the global geopolitical landscape after winning the Cold War against Russia.

“We win a relative trade war. In absolute terms we suffer. But we win relative to others,” says Mr. El-Erian.

“I think the markets have understood that the US is in a better place than the rest of the world.”

Monday, the major US stock market indexes finished at: DJIA -84.10 at 25679.90, NAS Comp-113.91 at 7702.35, S&P 500 -19.30 at 2840.23

Volume: Trade on the NYSE came in at 773-M/shares exchanged

  • NAS Comp +16.1% YTD
  • S&P 500 +13.3% YTD
  • Russell 2000 +13.1% YTD
  • DJIA +10.1% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes is Neutral to Bullish in here.

Have a terrific week

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.