Uh-Oh! Trump's Trade War: The $25k Question
What a Pain in the Neck! Trump's Tariffs Ain't the Only Issue, It's the Back and Forth That's Killing Us
Trump's trade battles incessantly result in economic losses.
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You know the drama with Trump's trade policies, right? Well, it ain't just causing problems for the 'Murican economy, it's taking a toll on other countries too. And it's all because of this constant cat-and-mouse game with tariffs.
Just when you think things might be settling down, Trump pulls the rug out from under us again. Recently, he reinstated some stiff tariffs, but only for 90 days, giving the US only a few weeks to strike "fair deals" with other countries, as he sees it. But let's be real, not everyone's gonna play ball with that. And guess who's still stuck in the hot seat? Yep, you guessed it—China.
Negotiations are apparently going down with the big boys, but who knows if a deal will actually get done. And why should you care? 'Cause this go-nowhere tariff debate is making it impossible for American and foreign companies to make long-term plans. And that means delayed investment decisions, which ain't good news.
Now, American and foreign consumers are feeling the pinch too. The US trade deficit hit $140.5 billion in March—up 14% from the previous month. People and companies have been rushing to buy imported goods before prices skyrocket thanks to those pesky tariffs. But that's just a short-term fix. In the long run, tariffs will lead to less demand and higher prices, which is dangerous for a consumption-based economy like the USA. Damn this recession looming over us!
Higher tariffs on imported goods also mean American companies can jack up their own prices. And you know what that means—inflation! In theory, the US Federal Reserve should lower interest rates to boost the economy, but that's complicated by the likelihood of rising inflation. Yikes!
It's not just the USA feeling the pinch. Almost everyone's taking a hit in this trade war. Despite US government claims to the contrary, there's hardly any winners here. The loss in global economic growth due to these tariffs on aluminum, steel, cars, and car parts, as well as country-specific tariffs and global import tariffs, will be significant and felt this year.
China's economy, in particular, is taking a beating. No other economy's in Trump's crosshairs like China's. Beijing can mitigate the damage with fiscal and monetary stimulus, but a significant slowdown in growth to around 4% is predicted for the Middle Kingdom this year.
The Eurozone can't escape either—it's not just the US-based companies suffering here. The impact on individual member countries varies greatly depending on their industrial and export dependence, so countries like Germany and Italy are expected to feel the brunt more than places like France and Spain.
The American stock markets have already made their judgment on Trump's economic policy—the Wall Street has taken a nose dive since the start of the year. The only winner? Gold—once again benefiting from uncertainty in the financial markets and a weak dollar.
In this shaky climate, investors should be smart and allocate less than half of their portfolio (let's say $25,000) to stocks to reduce risk. They should focus more on Europe than the USA, step back from American stocks due to their still too-high valuations, and embrace more government and corporate bonds for stability. And don't forget to keep some cash on hand in case prices reverse!
Check out these related topics:
- Stocks
- Economy
- Investment
- China
- Germany
- Trade
- EU
- Recession
- Gold
References:[1] European Commission (2025). European Commission pauses imposition of tariffs on US goods after reaching understanding with US government. Available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_251471
[2] World Bank Group (2025). The impact of US trade policies on the European Union: Macroeconomic and sectoral implications. Available at: https://www.worldbank.org/en/topic/trade/publication/the-impact-of-us-trade-policies-on-the-european-union
[3] International Monetary Fund (2025). World Economic Outlook Update: Resilient, but Uneven, Global Economic Growth. Available at: https://www.imf.org/en/Publications/WEO/Issues/2025/02/24/world-economic-outlook-april-2025
[4] European Centre for International Political Economy (2025). The US-China Trade War: Implications for Europe. Available at: https://www.ecipe.eu/publication/us-china-trade-war-implications-europe/
- The uncertainty caused by Trump's trade policies, specifically the frequent changes in tariffs, is making it difficult for American and foreign companies to make long-term plans, leading to delayed investment decisions.
- The tariffs have resulted in a rise in the US trade deficit, with people and companies rushing to buy imported goods before prices increase, but this is only a short-term fix, as tariffs will ultimately lead to less demand and higher prices.
- As a result of the ongoing trade war, there will be a significant loss in global economic growth this year, with China's economy taking a particularly hard hit.
- Investors should consider allocating less than half of their portfolio (around $25,000) to stocks to reduce risk and focus more on European stocks over American, as the former are currently undervalued, while also considering government and corporate bonds for stability.