April 4, 2025
The market freefall continues. Just yesterday, the DOW plunged by 2,035 points in a massive sell-off. Another $2 Trillion dollars just wiped out of the U.S. economy. A final report for the day will be coming after the markets close. Why does the markets continue to plunge? Because just as expected, China has retaliated with reciprocal tariffs aimed at the U.S. The tariff response is very high. What is the tariff imposed by China? Who cares at this point. What China has done was to make sure that its people don’t purchase American made products because they will be priced out of reach by most people in their country, and they will be forced to purchase anything besides U.S. goods. That’s how the Canadians are thinking too. Economists predict that a recession probability jumed from just 40% last week to 60% this week.
Why does China want to raise prices to their people. Actually, they don’t want too, as unfortunately China seems to know more about global trade than our president does. The end goal is to make sure that the Chinese people decide to purchase Chinese products instead on American made markets. That’s the idea behind tariffs. The demand for U.S. products will go down, and exports to China will go down. China will do what the American president thinks he can do better. The fact is that Trump most likely will not ever be successful, but the Chinese president most likely will because China will now have more willing trading partners than America. And if the Chinese president can’t do it all on his own, he will import from other countries, like he is already doing. The Chinese economy is surpassing America’s economy by a long shot. Canada and Mexico have made recent trade agreements with China, so they can import goods at just about no tariff rate attached. So China will be better off. America will not. Canada has decided to sell the oil to other countries instead of America. Previous to Trump’s trade war, Canada was sending 97% of all oil they produced to America. That’s no longer. What country in their right mind wants to trade with America right now. The answer is – NONE. Free trade will continue between the rest of the world, excluding the United States. So what’s left for America? As Trump sees it as temporary pain, the prices of goods will come down. If America can hold on as long as that will take, Trump may be right. The prices will come down because the supply of American goods will increase because other countries will not want to pay high prices for our products that they can purchase elsewhere at a lower price. American products with higher inflated prices will have to be purchased by U.S. consumers. The U.S. buyer will not have much of a choice other than to buy American, as foreign products will become more expensive to buy. Since the products Americans will be purchasing more now will be made in America, the prices will go down. The ‘Supply vs. Demand’ formula no longer works in a ‘stagnation’ economy. The prices will have to come down to convince any American to purchase anything.
Unfortunately, America does not have the time to wait for this to happen. It can’t happen overnight. The auto industry is a prime example. Let’s take Ford Motors for example. Not a single Ford vehicle sold in this country can be made with parts ONLY made in America. If Trump put a 100% tariff on Mexico, Ford Motors would go out of business immediately. A percentage of parts put in Ford products are made in MEXICO. So in order for the cars to be sold in America, the part made in Mexico that are installed in Mexico will be tariffed and the parts, along with the vehicles will go up drastically in price. Tooling an economy in the U.S. that can handle making products totally in America like the automobile will take more time than Donald Trump has left in his 2nd term. Can the citizens of America wait for this to happen? Of course not. The markets are steadily dropping each and every day. 401K’s are dwindling, people are loosing jobs. Farmers are going to be decimated. China has just banned Soybeans from the U.S. Soy bean exports will drop considerabaly and some U.S. farmers will go out of business. Nothing short of a recession can happen if things don’t turn around.
Maybe Donald Trump has a trick in his sleeve to jump start the U.S. economy, but he has not given not even once ounce of the formula and the steps he is taking to accomplish this, other than to tariff the world.
The world economy is just what it states. It’s a world economy, and Trump doesn’t like it. He’s obsessed with tariffs. He did them in his first presidency, and he’s doing it again. China saw the first taste of tariffs from Trump in 2017. Now they are ready to confront him, and they are. Trump will never get the economy under control with the time he has left in office. The pain that America is experiencing will be felt for years to come.
Well, I didn’t realize that the stock markets have closed while writing this article. It’s even more dismal than yesterday, with the DOW dropping another -2,231.07 points, with the value dropping another 5.5 %, at least another $2 trillion in a single day. More to come in the next article.
