Many companies are holding out hope that the trade negotiations end quickly but have warned that job cuts and price increases could be imminent. BMW and General Motors sent their warnings in writing to the Department of Commerce.
“This is hurting the economy but so far it’s manageable,” says Mark Zandi, chief economist of Moody’s Analytics. “If the war continues to escalate, it will do more damage and at some point it will undercut the good economy” and trigger significant job losses and likely a recession.
Despite fears that the trade dispute could spiral out of control, which would slow global growth and dampen investor and business confidence, Wall Street pros still believe the president’s use of tariffs as a negotiating tool will likely be a winner.
“Right or wrong, many investors still feel the U.S. has the upper hand in this battle and will win in the end,” says Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research.
That’s because China has more to lose. The country’s exports to the U.S., measured in dollars, outnumber American exports to China 3 to 1. That buying power is tough to replace.
And although tariffs could cause prices for consumer products ranging from cars to washing machines to rise, “the U.S. does not need China as much as China needs the U.S.,” says Barry Bannister, head of institutional equity strategy at Stifel.