Fisher Investments Editorial Staff
Others

Trading in the New Year

By, 01/04/2010

Story Highlights:

  • The US International Trade Commission announced new tariffs on US imports of Chinese steel pipes.
  • This year-end decision is another step in a recent disturbing trend of trade intervention.
  • Trade is vital to the global economy. Luckily, these tariffs and tiffs so far aren't big enough to derail the global bull market.

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If you're looking for a bit of New Year's cheer and MarketMinder's take on what's ahead, you'll find it here 

As the year draws to a close, we'd be remiss if we didn't mention news out of the US International Trade Commission—a decision to impose new tariffs on US imports of Chinese steel pipes. This decision is largely considered a victory by US steelmakers, as increased duties will undoubtedly limit the inflow of subsidized steel from China. However, less competition for the domestic steel industry could in turn spell higher prices for US consumers.

 

This year-end decision (announced slyly during a week between holidays, when most folks aren't focused on the news) is another step in a recent disturbing trend of trade intervention. Tariffs have become a growing point of contention between the US and China since President Obama levied increased taxes on Chinese tire imports in mid-September. Following that announcement, and fearing a precedent of more "special safeguards" in the future, China brought the dispute to the World Trade Organization.

 

Why get all worked up over a few steel pipes and tires? Because trade—imports and exports—is vital to the global economy, and thus stocks. That trade was hammered so hard at the recession's nadir, and subsequently recovered strongly as the broader recovery took hold, signifies its importance.

 

But exhale. Political biases aside, this new development won't likely jeopardize the overall $409 billion in annual trade between the two economic powers—nor the continuing global bull market. And we're simply nowhere near Smoot-Hawley territory—but the path toward protectionism can become a slippery slope. Also news this week, Taiwan is considering reinstating an import ban on US beef, distancing themselves from the US while simultaneously working to improve trade relations with China. These things can get messy quickly, and an escalating trade war (if that's what this is to become) isn't beneficial to economies or investors—worth keeping an eye on into the New Year.

 

So don't let this dampen your holiday plans—stocks are on track to finish their best year since 2003 and more is likely on the way in 2010. Have a happy and healthy New Year.

 

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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