There are fears of an all-out trade war as comments made by President Trump have stirred the pot on that possibility. He has said that his administration will set tariffs on aluminum and steel at around twenty-five percent on steel and ten percent on aluminum. Those tariffs could go into place as early as next week. Since the world now knows that this is the intention of the President, they are worried that other countries may retaliate with tariffs of their own. If they do, then the trade war is really on.
People often do not fully grasp the fact that a trade war would be a total disaster not only for the economy of the United States but also for many other countries as well. CNBC reports that the stock market has been in decline the last couple of days simply on the fear that the tariff talk will lead to a trade war.
The announcement of these tariffs have lead many world economic leaders to condemn the action. They say that nothing good can come of it, and that doing this will only increase tension between the United States and its allies. That might prove to be true, but we are far from knowing the true extent of these tariffs just yet.
It is not entirely unusual for a country to impose tariffs as a means of protecting their own domestic industries. However, when this is done, it is usually something that agitates other countries in the process. They feel the need to respond with tariffs of their own because of the disruption to the trade that they did have with the original country imposing tariffs. Before long there is a back and forth trade war that can really spiral out of control.
The stock market has reacted negatively to this news, but also to the news of poor earnings from certain companies that have been reporting as of late. Other factors such as the Federal Reserve potentially raising interest rates again has some worried as well. That is something that could happen as the Fed has hinted that they intend to do this at some point in the near future.
All in all, it is a potentially volatile time to be in the market. That is why people have to pay attention to all of these things happening at the same time if they want to know why the market is behaving as it is.