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Despite market optimism being reflected through the stock market rise, the trade war initiated by the U.S. President Donald Trump continues under the rug. Since President Trump announced 25 percent tariffs on all steel imports and 10 percent tariffs on all Aluminum imports, several countries like India, Mexico, China, and Russia have announced countermeasures. The European Union has also joined in the war by announcing retaliatory tariffs on U.S. imports. In addition to that, both China and the United States have announced a 25 percent tariff on imports worth $50 billion, with more to follow.
So far, the tariffs have largely be announced on goods. However, with the United States running $550 billion goods deficit with the rest of the world, the foreign retaliation could soon target U.S. services, where the U.S. enjoys a sizable surplus. During her speech at Bundestag, German Chancellor Angela Merkel has raised this point several times since the onset of the trade war.
The chart shows the U.S. services balance with the rest of the world. According to data from the census bureau, the U.S. services surplus with rest of the world was $255.2 billion in 2017.
