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Money News

The U.S.-China Trade War Explained

August 05, 2019
world map with US and China flags

2 min read

The trade war with China continued to intensify this week, as President Trump said he would hit the world’s second-largest economy with new tariffs.

Stock market indexes around the world dropped on Monday, August 5, 2019  as China retaliated by canceling orders for U.S. products, and by devaluing its currency.

What’s happening with the trade war with China?

What’s a trade war again?

A trade war is when countries start waging an economic battle with each other using tariffs. One country will put tariffs on another’s goods, and the other will retaliate in kind.

A tariff, sometimes called a duty, is a tax imposed by one nation on another’s imports. (In some cases, tariffs can be “levied”–or placed–on exports.) The tariff is generally calculated as a percentage of the import’s total value, including freight and insurance charges.

Governments tend to impose tariffs on another’s goods to make their own products more competitive and affordable, and to generate revenues.

Until recently, the U.S. has generally refrained from increasing tariffs and entering into trade wars with other countries.

The trade war with China could decrease global growth by $1.2 trillion, according to recent reports. The U.S. and China are the world’s first and second-largest economies.

Remember the Stash Way

Investing can be scary and confusing, especially when markets are volatile.

That’s why we’ve boiled down our investing philosophy into three basic principles that we hope can guide you as you make your first investing decisions. We call our approach the Stash Way. Here are its three pillars:

You can learn more about the Stash Way here.

By Jeremy Quittner
Jeremy Quittner is the senior writer for Stash.

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