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Tariffs

With the new administration in the U.S., some things related to geopolitics and trade are about to change. China is on the defensive, because the Trump administration is looking at more protectionism when it comes to trade, particularly with Asian countries. In the chart below, you can see that although tariffs have come down over the last 25 years, the U.S. continues to have one of the smallest barriers to entry when it comes to trade, but it’s subject to certain degree or friction when products are exported to BRIC nations, for instance. Tariffs can be a source of inflation for goods subject to them, but it’s not clear that the overall impact of tariffs is inflationary. And then we have the Non Tariff Barriers (NTBs), that are not monetary measures, but end up being a burden on trade, simply by increasing regulations, or changing the rules to simply slow the movement of goods. Tariffs do affect corporate margins, and therefore net income. That’s the flip side of protectionism.


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