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Illustration: Aïda Amer/Axios
Experts are beginning to worry that the trade war between the U.S. and China won't be over in weeks or even months, but has become a long-term conflict that could last for decades.
Driving the news: President Trump tweeted on Thursday that the U.S. would put an additional tariff of 10% on $300 billion worth of Chinese goods on Sept. 1, again escalating the conflict that has already weakened U.S. growth and business investment.
What's happening: Even before Trump’s latest tweets, ratings firm S&P Global had revised down its outlook for U.S. GDP growth through 2022, because "the risk of trade protectionism between the U.S. and China will persist for some time."
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Retail company shares were among the hardest stocks hit on Thursday after Trump's tariff announcement.
Why it matters: While previous tariffs targeted mainly inputs, or components of consumer goods, the new tariffs will apply largely to things people buy directly. That will raise the cost of everyday purchases and force retailers to either increase prices or eat the cost of the tariffs, putting pressure on their margins.
By the numbers:
What they're saying: "The list of products these tariffs will hit are almost entirely consumer oriented," said the Retail Industry Leaders Association in a statement. "This new 10% tariff on Chinese imports is a direct hit on consumer products and family budgets, plain and simple."
What to watch: Economists tell Axios that Trump's tariff announcement looks more like an attempt to sway the Fed into interest rate cuts than anything else.
Despite a dovish Fed and a global easing cycle, investors continue to pull money out of emerging market equities, data from the Institute of International Finance shows, and it's largely because of trade war fears.
Driving the news: Net capital flows to EM totaled -$35.8 billion in June, continuing a negative trend from May that saw net outflows of $19 billion. Net outflows were primarily driven by China, which more than erased Saudi Arabia’s large inflows that month.
Between the lines: "The U.S.-China trade dispute strikes a nerve with investors who worry about the new era of de-globalization and the use of national security to achieve economic objectives," Elina Ribakova, deputy chief economist at IIF, tells Axios.
Yes, but: Investors have shunned EM stocks, but have been buying bonds from the asset class at a high level. Emerging market debt has seen major inflows this year, with $23.1 billion in July.
Crude oil also was hit hard by the tariff news, with oil prices suffering their worst trading day in 4 years, falling by 8%.
Energy stocks fell across the board with the SPDR energy ETF dropping more than 2% on the day as the trade war escalation and fear of higher tariffs stoked worries about slowing demand in China and around the globe.
Between the lines: The tariff announcement could not have come at a worse time for the oil market, which was already primed for losses after the Fed's rate cut decision Wednesday. A weak dollar strengthens oil prices, which are measured in dollars.
P.S. ... Soybeans, the leading U.S. agricultural export to China, fell 2% to $8.47 a bushel on the tariff news. Corn and cotton futures also fell by similar amounts.
International visitors are cutting back on trips to the U.S. and spending less money in the country when they do come, data shows, as the strength of the dollar has risen, making U.S. goods purchases more expensive.
What it means: Data from the U.S. Travel Association (USTA) shows a steep and steady decline in the U.S. share of international travel, which is set to continue until at least 2022.
The big picture: The U.S. share of the global travel market has been falling for 4 straight years since touching a high of 13.7% in 2015. The nation's share of international tourism earnings fell to 11.7% in 2018.
Why it matters: That decline in market share represents losses to the U.S. economy of 14 million international visitors, $59 billion in international traveler spending, and 120,000 U.S. jobs, USTA's data shows.
What's next? If the environment continues as expected through 2022, it would mean a further loss of 41 million visitors, $180 billion in exports and 266,000 jobs, USTA says.