Born in the nation’s capital and raised in Maryland, Ted Bauman is an economist who studied that subject and history at the University of Cape Town in South Africa. After working in the nonprofit industry for twenty-five years, managing the funds of organizations that build low-income housing, he returned to the United States and became an editor at Banyan Hill Publishing. He lives in Atlanta, Georgia, with his family.
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He says that if the trade war with China really gets going it will be the end of the long-running bull market on U.S. stock exchanges. The U.S. has a trade deficit with China of over $330 billion. Trump thinks if he applies a bunch of tariffs that situation will change. However, as Ted Bauman points out, most of that trade imbalance is because many of the giant American companies have fled there so they can take advantage of low labor costs and lower taxes.
These companies earn around $100 billion a year in China. Once you factor this into the trade deficit we actually have at trade surplus with them as we do the rest of the world. Ted Bauman says that if China really decides to retaliate against the giant American firms doing business there it would easily drop the United States into a bear market.
He said that the price-to-earnings ratios are historically high so if these companies experience a reduction in earnings their stocks will come back to Earth pretty quickly. Ted Bauman expects the entire global stock market will collapse if that occurs. He wrote that if you invest in American multinational firms than a trade war is going to devastate your portfolio. If you invest this way than whether your interests lie with the big corporations and not their workers.
China just imports about $130 billion in goods from the United States each year and then another $50 billion in services. They don’t import enough goods and services to match Trump’s tariffs tit for tat. They do still have weighs of retaliating, though, if that is the choice they make. Ted Bauman says this wouldn’t even reduce their GDP growth by much, perhaps by only 0.1%.
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