With all the talk about tariffs, now seems like a good time to take a look at US exports. The last few years we have seen relatively weak US exports due to the strengthening US dollar. But since 2017, the dollar has weakened considerably and exports have been the primary benefactor. You can see this trend below.
And here you can see US exports beginning to pick up since 2017. Now, this is important because if a trade war were to occur, this trend would stop and likely reverse.
I am not expecting the “Trump tariffs” to go in place. I think the President is bluffing. He is signalling his strength in hope that China will play ball and stop producing aluminum and steel at a high rate. The problem is, China is the world’s largest consumer of steel and aluminum (and many other commodities as seen below).
Without digressing too much, this is because China is in a tremendous growth phase to hit a 2020 target of doubling their GDP in 10 years. In order to do this, the country needs to develop the country as much as possible. And we are starting to see the effects as more lower tier cities are becoming developed.
In any event, I am not expecting any tariffs to go in place. This is purely President Trump signalling he has power. But, he will be tested and ultimately we he will have to show he is bluffing.