Assessing the Risks of a Tariff War

Treasury Secretary Steven Mnuchin said there is “a level of risk” that the tariff dispute between the U.S. and China will escalate into a full-scale trade war. 

Nevertheless, he’s “cautiously optimistic” that the world’s two largest economies will resolve their differences through negotiations rather than tariff escalation.

“This has been very well organized. Our strategy is very clear,” Mnuchin said Friday in an interview with CNBC. “I’m cautiously optimistic we’ll be able to work it out.”

Meanwhile, Mnuchin said the U.S. is prepared for an escalation of the trade dispute.

In response, China has responded that would counter U.S. measures “to the end, at any cost.”  In addition, China has called on the European Union to act with China to counter US.. protectionism.

J.P. Morgan expressed concern about a trade war between the U.S. and China.  “I think it’s the greatest danger today to the world economy.” This according to Jacob Frenkel, who is Chairman of J.P. Morgan Chases.  “It’s still not a trade war.  I would say there were some skirmishes, and there are skirmishes.” “I think we should all remember the disaster of 1931.  There were good intentions, to protect American jobs.  Nevertheless, the result was a catalyst to the Great Depression. We should avoid it at all costs.”

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