By Zach Scheidt
This post Prepare For War (Not Nuclear) appeared first on Daily Reckoning.
Get ready for a new international conflict!
Only this time, instead of bombs and bullets, the weapons of choice will be tariffs and quotas.
That’s right… All indications point to a full-fledged trade war on the horizon!
The media has been talking about the potential for an international trade war for quite a while now, after Trump made it clear that he wanted the U.S. to pull out of the North American Free Trade Agreement (NAFTA).
But the conflict hit a new level when Trump announced that his administration would impose tariffs on all steel imported to the United States.
The news set off a political firestorm, and many investors reacted by selling positions. The market naturally pulled back a bit, and the uncertainty on Wall Street is likely to drive back-and-forth trading for several weeks to come…
Tariffs and Trade — What’s Going On?
Steel produced in many countries around the world is often subsidized by local governments. In other words, overseas steel manufacturers get special breaks to help them keep costs down.
This allows international steel companies to make products cheaply, so they can sell the products in the U.S. at a price that is less than what “free market” U.S. producers can compete with.
That’s not fair. And so Trump’s tariffs will raise the price for imported steel to level the playing field for U.S. steel companies.
Yes, that’s a very simplistic explanation for what is going on. There are a lot of details that have to be considered and the whole trade war / tariff situation is extremely complex.
If you listen to one medial outlet, you’ll probably hear that Trump’s new tariff is completely absurd and hurts Americans.
That’s not completely true. But there are some pieces of logic in that argument that need to be considered.
On the other hand, if you listen to a different media outlet, you’ll hear that Trump is justified and should level MORE tariffs against other countries and that a trade war is a good thing for Americans overall.
That’s also not completely true. But there are some parts of this argument that need to be considered.
As is often the case with political and free market discussions, there is not a black and white — or right and wrong — resolution to the issues we face. And we’ll likely come up with the best solution if politicians can actually have an honest discussion with each other rather than simply recite talking points and dig in their heels.
Of course, as investors, our job is to figure out the best way to profit from the situation — and also how to protect our wealth as markets react to the ebb and flow of trade war news.
So rather than enter the debate about what is right and wrong about these tariffs, we’ll focus today on what you need to do with your investments to navigate this changing market.
The Obvious Beneficiary — U.S. Steel Companies
Of course, the stocks that will do best …read more
Source:: Daily Reckoning feed
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