TL;DR
Trade wars aren’t just about numbers; they’re about trust. Eroding that trust has far-reaching consequences, impacting businesses, currencies, and individual livelihoods—a cost far exceeding any short-term gains.
Story
It doesn’t matter if all tariffs are cut to zero.
John, a travel agent specializing in U.S. tourism, watched his bookings plummet. His livelihood, like countless others in the hospitality sector, became collateral damage in a trade war. This wasn’t a typical recession; it was a crisis of confidence.
Think of it like a Jenga tower: global trade relies on trust. One wrong move—like suddenly imposing tariffs—destabilizes everything. Businesses halt investments. Tourists stay away. The U.S. dollar, once a safe haven, starts to look shaky.
This isn’t just theory. U.S. tourism has collapsed. The damage is spreading to related industries, just like falling dominoes.
‣ CAPEX (Capital Expenditure): Money spent by companies on big-ticket items like equipment or property—a key indicator of economic health.
Even reversing course now won’t magically fix things. Trust, once lost, is hard to regain. Remember 2008? The collapse wasn’t just about subprime mortgages; it was about the erosion of trust in the entire financial system.
This situation feels eerily familiar. Foreign investors, spooked by the erratic policy changes, are seeking safer harbors for their money. The Swiss Franc’s rise against the dollar is a clear sign of this capital flight.
‣ USD/CHF: The exchange rate between the U.S. dollar and the Swiss franc.
There’s more at play than just tariffs. The erratic, social-media-driven policymaking erodes trust in U.S. institutions. Businesses crave stability and predictability; they aren’t getting that now.
Just like Enron’s accounting fraud shattered investor confidence, so too does this inconsistent approach to trade destabilize the global market. The damage is done, and a simple ‘I’m sorry’ won’t cut it.
The real tragedy is the human cost. John’s story is just one of many. Families are struggling, businesses are closing, and the future looks uncertain.
This isn’t a partisan issue; it’s about the rules-based international order that has ensured relative stability and prosperity for decades. When those rules are casually disregarded, everyone suffers.
Advice
Diversify your investments. Don’t put all your eggs in one basket, especially one as volatile as the current U.S. market.
Source
https://www.reddit.com/r/stocks/comments/1jyf4s3/it_doesnt_matter_if_all_tariffs_are_cut_to_zero/