President Trump’s barrage of tariff-related tweets continued today in the wake of lapsed trade talks that ended last week between the United States and China. With Bloomberg reporting the president’s tweeted threats to increase tariffs on Chinese goods cost global markets about $1.36 trillion, the president did not succumb to pressure to stop tweeting as the markets opened this Monday.
After China responded by imposing retaliatory tariffs on American goods ranging from beer and swimsuits to natural gas, the president observed, “There is no reason for the U.S. Consumer to pay the tariffs, which take effect on China today.” He suggested buying products produced in other countries or, “best idea,” buying the product “inside the USA.” The president also speculated the ongoing trade conflict would cause companies to leave China for other countries, such as Vietnam.
“There will be nobody left in China to do business with. Very bad for China, very good for USA!” President Trump wrote. He added that China should not move forward with retaliatory policies because the country “has taken so advantage of the U.S. for so many years that they are way ahead.”
Chinese Blame Breakdown on Diplomacy Issues
While in the United States, analysts began predicting how costs might rise as Chinese tariffs go into effect, Chinese commentators blamed the United States’ “highhanded” manner in “threatening tariffs” for the breakdown in talks last week. One economics professor from Tsinghua University said, “Mutual trust and respect are of the essence in handling the negotiations.”
Elsewhere in China, analysts speculated the country would possibly halt purchases of American agricultural and energy products, including reducing orders for Boeing aircraft and possibly selling off part of China’s large holdings in U.S. Treasuries. This is not quite the threat it once might have been since China has been diversifying its portfolio for nearly a decade.
It also bears noting that both China and the United States have placed stays on their tariff policies, essentially allowing for another push for a deal before they go into effect. Those stays are roughly the same duration.
What the Tariffs Could Mean for U.S. Real Estate
Last fall, many investors feared the end of the house-flipping boom might come in tandem with new international trade policies from the United States. With the costs of home renovation already rising and a shortage of construction labor affecting the national market, investors feared increased costs in construction materials could put an end to a thriving retail home sales market.
“Clients and contractors are having to set contracts with escalation clauses for projects…because we’re not sure how far prices are going to go north,” said Washington, D.C.-area contractor Justin Sullivan last September. He added the effects of these clauses are to further inflate costs since many clients will pay more to expedite a project and gain some degree of predictability regarding costs. “It makes them want to do the project more quickly, trying to get it done,” he said.
While Sullivan put a positive spin on the situation, noting that concerns about materials costs “put more pressure on everyone to try and be as diligent about the costs as possible,” nearly every angle of home renovation and construction was affected in the first round of tariffs. Materials impacted included wall and floorboards, light fixtures, cabinets, heating and cooling equipment, and tiles for bathrooms and backsplashes. Developers warn this could have a particularly detrimental effect on new construction.
“NAHB’s forecast calls for slowing growth, given declining home price appreciation and existing home sales volume, combined with rising construction costs,” explained National Association of Home Builders chief economist Robert Dietz.
“At the end of the day, I can guarantee you the price of every project we do is going to go up.” D.C.-area developer Bruce Case put it more bluntly, predicting “about a 7-8 percent increase to the consumer.” He added, “I would love to be able to eat some of that, but at this point I don’t know a way to engineer around that.”
Tell us what you think:
- Are the proposed tariffs necessary for the good of the national economy?
- How is your business affected by rising tariffs?
- Is home-flipping part of your investing plan for 2019?
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