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Consumers Are a Casualty on Both Sides of the US-China Trade War

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Retail sales data releases

On May 15, both the United States and China released their April retail sales data. China’s retail sales rose 7.2% in April, the slowest rate of growth since May 2003, according to Reuters. On the other hand, US retail sales unexpectedly fell 0.2% last month.

Both the data points missed estimates. While analysts were expecting US retail sales to rise 0.2% in April, they were expecting China’s retail sales to rise 8.6%. US equity market futures pointed to a weak opening on May 15, and the S&P 500 (SPY) was down roughly 0.6% in premarket trading. Though the S&P 500 opened lower today, it has recouped its losses and is trading with a gain of 0.30% as of 10:45 AM EDT.

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Automotive sales

Both the US and Chinese first-quarter GDP growth rates were better than expected. The US economy was especially strong and recorded 3.2% growth in the first quarter. However, automotive sales have been a weak spot in the United States as well as China. China’s automotive sales contracted 14.2% YoY (year-over-year) last month. The country’s vehicle sales have fallen YoY for ten consecutive months. China is a major market for US automotive companies such as Ford Motor Company (F) and General Motors (GM).

Retail sales

If we look at US April retail sales data, we’ll find that automotive sales were again a weak spot for the country. However, we should remember that the data are reflective of April, when US-China trade talks looked to be headed for closure. Over the last week, we’ve seen an escalation in US-China trade tensions, and both sides have increased tariffs on billions of dollars’ worth of each other’s goods.

While the tariffs may or may not help in terms of reaching a trade deal, in the short term, consumers could be the ultimate casualty. If President Donald Trump goes ahead with imposing a 25% tariff on all remaining Chinese products, the prices of several goods, including Apple (AAPL) products, could rise. Last year, several US companies, including Amazon (AMZN) and Walmart (WMT), voiced their opposition to the tariffs, warning that they might have to increase their prices if the tariffs were imposed.

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