The threat of a Trump trade war has investors seeking safety from collateral damage. U.S. stocks fell as investors shifted focus from the Federal Reserve to the possibility of an escalating trade war with China.

According to Bloomberg Markets, “Major U.S. equity benchmarks fell by about 1 percent, with technology-heavy gauges dropping as much as 1.5 percent.  The 10-year Treasury yield slid toward 2.8 percent and gold advanced with the yen as investors sought safe havens. The dollar rebounded.”

However, these tariffs are much bigger than the U.S. and China. The entire world could be affected and many are wondering, where is the line we draw in the sand?

Trump Ready to Slap $50 Billion Tariffs on Chinese Goods

With U.S. President Donald Trump ready to slap tariffs on $50 billion worth of Chinese goods, the question now is how China will respond, leaving many worried there will be retaliated action. China said it will take all ‘necessary measures’ to defend its self and President XI Jinping is not the type to hold back. According to Bloomberg Politics, “China could hit back with measures against America’s $140 billion of annual exports to the Asian powerhouse if President Donald Trump imposes tariffs.”

If so, many sectors of the U.S. economy would be vulnerable to China’s action including capital goods, industrial supplies, travel services, food feed and beverage, and auto vehicles and parts. Although many are urging the White House to reconsider, including major companies like Nike, they feel that this is something they campaigned on and must execute.

“The tariffs expected Thursday will be the most significant to date from a President who campaigned on a promise to correct the US’ global trade imbalance, particularly with China, and to revitalize US manufacturing,” according to CNN. U.S. exporters who rely on the Chinese market are nervous. And a retaliation with restrictions on U.,S. companies could devastate U.S. companies.

Although the chance of a full on trade war is still small, friction is expected to rise as the U.S. imposed more trade tariffs on Chinese products.

As uncertainty over the trade wars intensifies, investors are looking at safe haven investments such as treasury bonds. For example, the iShares 7-10 Year Treasury Bond (IEFsaw $222.37 million net inflows over the past month according to ETF Data. 

For more information on current affairs, visit our current affairs category.