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The Potential Impact of a Trade War with China

09/16/2009

The Potential Impact of a Trade War with China

First of all, let's be clear - I am rather certain this is not a war, but rather posturing by the Administration on two fronts.

First, Congress has not passed the Obama Administration's new trade accord agreements with Panama, Colombia, and South Korea. This looks like a little game of give and take. Impose some tariffs on tires for some votes and maybe Congress warms-up to approving the new trade accords. Also, later this month, President Obama hosts the G20 meeting here in Pittsburgh. Again, some positioning ahead of that meeting.

The media got rather hysterical yesterday over the trade war possibility. Former Commerce Secretary Carlos Gutierrez did an excellent job last night on Fast Money going "Inside Baseball" and agreeing with both of the posturing points. I will say it is rather bold to pick a fight with the fastest growing global economy and largest purchaser of U.S. debt. Let's remember China is the American consumers' banker.

The takeaway - the market shook it off. Rather impressive isn't it Mr. and Mrs. Bear?

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