Trade Wars: The International Skirmish and Your Pocket
by SGL Financial
Are we on the brink of a major trade war? Most importantly, could this potentially impact your investment portfolio and put it at risk?
When we can rely more on our own resources versus those of another country, this is supposed to help stimulate our economic growth. But when tariffs are raised on both sides, this is what causes a trade war. Click below to learn more about the potential disaster a trade war can have on not only our economy but our personal financial security.
Thank you for watching and we look forward to seeing you next time!
War of any kind causes everyone, winner or loser, to suffer. Trade wars are no different. Yet, we’re on the brink of having a major trade war. So, what’s really going on out there?
Hi, I’m Steve Lewit and this is SGL TV.
Over the years, the US has recognized that some countries are more efficient at producing goods than others, and it would make sense to trade with them and them with us. That trade has actually contributed to boosting the US economy and our standard of living. Along the way, however, people in the US have been hurt as they’ve seen their jobs move overseas.
Trade has also made us much more reliant on other countries. Let’s say, China who makes much of our steel, and the US have a falling out and we need steel to fight a war. We would find ourselves with a steel resource deficiency, and a tremendous disadvantage. Or what if China doesn’t play well or fairly in trade as they’ve done in the past? So, the question you have to ask yourself is, ‘Are the benefits of world trade worth the risk and cost of having it?
You see, the politics today say that global trade is not worth the risk, that we should be more protectionist – we do that by raising tariffs on products we buy from overseas and what happens is they become more expensive, we buy less and rely more on our own resources, and that’s supposed to stimulate jobs, new industries, and production – that’s the idea.
However, when we raised tariffs on what we buy from other countries, they retaliate, they raise tariffs on what they buy from us. Now we have a trade war, both countries suffer as prices of important consumer goods rise, such as oil. If you’ve filled up your gas tank lately, you understand that. And then there’s a period of productivity, and economic growth stagnation as both countries need time to adapt to their new normal.
You see, in trade wars, jobs are in the short run lost and the quality of life goes down. The stock market understands this, which is why the bigger the news about trade war, the more you see the markets react on the downside. Now, will the current trade skirmish evolve into a major war? Well, we don’t know.
So, the smart move when the markets are uncertain is to make sure you have downside protection in your portfolio, just in case the market declines, but also have the ability to have gains in your portfolio if the market continues to rise. So, if you’re not sure that your portfolio is able to do this or is built to be efficient like this, let’s get together for a portfolio review, so you can win trade wars or not.