The Biden administration's implementation of new tariffs on China, targeting nearly $18 billion worth of imported goods, has sparked discussions about the potential economic implications. Joining Catalysts to provide insights into the outlook following this tariff measure is Pangea Policy Founder Terry Haines.

Haines notes that "the Chinese have never gone without responding to United States tariff action," indicating that a response to these new measures should be expected. However, he suggests that since this dynamic already exists, a potential response is "not really a big deal" for markets, and it could even boost some stocks. Haines advises investors not to "fall for the tariff noise" as policymakers aim to "shore up the defense and industrial base."

When asked about any lasting fallout from these tariffs on Biden's bid for re-election, Haines suggests that "an awful lot of the economic narrative is baked in." With inflation remaining stubbornly high and prices elevated, he argues that "unless there was a big dive in prices, say 3 or 4 months ahead of the election, this narrative is not gonna change."

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video Transcript

President Biden announcing new tariffs on certain Chinese goods this Tuesday including $18 billion worth of tariffs on Chinese electric vehicles.

Beijing's Foreign Ministry Representative responded by saying that China opposes the unilateral imposition of tariffs which would World Trade Organization rules and will take all necessary actions to protect against, to protect its legitimate rights there.

President Biden giving his thoughts on how he thinks China will respond when he spoke exclusively with our own, Brian Sazi.

The fact is China already is what you might say, way over, way over their skis on this.

What they'll do?

I don't think it will lead to any international conflict or anything like that, but I think they'll probably try to figure out how they can raise tariffs maybe on products that are unrelated for more on the fallout from yesterday's announcement and what impact it might have on November's election.

We're going to bring in Terry Ha been policy founder, Terry, thanks so much for being here.

I want to start on your reaction to what the president was saying exclusively the Yahoo finance about the idea that this is not necessarily going to boil over into a T for tat with China.

Do you agree with that?

Well, I think you can expect a tit for Tat Madison, I did, the, the Chinese have never, have never gone without responding to United States tariff action and I imagine they'll continue today.

Uh That's really what the President said between the lines.

Uh So, you know, for markets, I mean, what you've got here is a continuation of an existing regime.

So, you know, it's, it's not a, it's not really a big deal.

Uh In fact, uh it, it probably helps some uh some stocks, autos and the like.

So there's that uh but what you, you know, what you're looking at here is a long struggle and I want to be real careful with markets to say, you know, don't, don't fall for the tariffs noise, which is relatively small.

What you're going to see in Washington over the next year or two is a, is a continued move towards shoring up the defense industrial base and that's really what's behind a lot of the tariffs, uh politics and politics aside.

So, Terry talk to us just a little bit more about that backlash, the risk here of an escalation.

What exactly could that look like?

What are some things that investors should keep in mind when we talk about how it could ultimately impact a handful of these us companies here down the road.

Well, I would look at a combination of things, you know, I I would look at uh firstly, firstly, market actions, uh you know, the, the Chinese will either uh will, will either uh keep in place or, or increase tariffs that already exist.

They might go an extra mile.

I, I wouldn't know what that would be but, you know, they will at least do a tit for tat, I would imagine.

I think it's reasonable to expect that.

And beyond that, I think you're going to see geopolitically, you're going to continue to see an upping of pressure in a lot of different places, including the South China Sea where uh where things are very tense and markets, I think don't understand how quite how tense they are.

I mean, we've got uh United States special forces on an island off of Taiwan right now.

Uh you know, just a few miles from the Chinese mainland and uh and that plus the bases we've already got there.

Uh you know, keep the Chinese themselves on high alert and uh and more aggressive.

So I think you're likely to see a ramp up in geo political risk, not just the market for Ta.

I'm glad you bring up some of the tensions that we see in the South China Sea.

It brings up this larger picture of tension, Brian.

So he was able to speak with the United States Trade Representative Katherine t on the importance of these tariffs in relation to some of those geopolitical tensions.

Let's take a listen to what she had to say they are significantly out of step with the norms, the standards and the rules that the international trading system has been built on, which is one that assumes and expects that markets and economies will behave on basis of the logic of demand and supply.

Instead, what we've seen from the PR CS economic policies and practices is a sustained and um a very targeted approach at establishing industrial dominance in sector after sector.

And it's interesting, Tara, we've also heard the ambassador someone switching course saying that tariffs aren't necessarily inflationary.

Do you agree with that?

Uh No, I don't, neither does anybody else.

But you know, she works for Biden and you got to say that in the White House, the last thing you want to do is be, is, is politically, is being caught saying that administration policies are contributing to inflation.

So they'll continue to deny that regardless of whether it's true or not.

I I also want to say a little bit more directly uh something that uh uh MT is uh uh alluding to which is that it's awfully rich that the uh the the Chinese are talking about uh violating trading standards set in the WTO uh China for China.

Today, China for 20 years has been classed as a developing economy in the WTO and has fought every uh every effort uh to uh to, to reclassify it otherwise.

And the idea that the second largest economy in the world is a developing economy which is, you know, is kind of risible and logic is risible in, you know, kind of basic uh basic verbal understanding.

But uh you know, this is uh this shows you how weak the WTO is and how much China is taking advantage of it.

So the United States from its perspective, feels like it has very little else it can do other than take unilateral action, Terry, when it comes to this.

A lot of people are saying that this is simply symbolic.

This move here from President Biden.

My question to you is this obviously coming ahead, the November election.

How much do voter do voters care?

And why are, why not?

Well, I think, I think Sean, I think an awful lot of the economic narrative is baked in.

It's Washington's instinct to want to continue to try to do everything it can to uh to actively help the incumbent or, you know, the other campaigns will attack it.

But the economic narrative here is pretty well baked in which is that inflation is stubbornly high and more importantly, prices are very high.

Uh That hurts the president a lot in a lot of states where he that he needs to carry.

Uh And it is a dynamic uh that shadows his campaign in a lot of those swing states.

So, you know, but it's very difficult, the idea unless there was a big dive in prices say three or four months ahead of the uh the election.

Uh This narrative is not going to change and it's not positive for the president regarding the upcoming election.

We heard from President Biden and former President Trump this morning that they're willing to debate one another.

I'm curious from your perspective, as we see the election start to heat up and become more part of the daily dialogue here.

What impact does that have on some of these broader foreign policy moves from the current administration?

Well, it'll keep the uh let me address it two ways.

Firstly, it will keep the aggressive foreign policy stance from from the current administration up.

Uh It will also uh you know, they, they will be perceived by the Trump people as trying to out Trump Trump.

So there will be a lot of tit for tat about uh uh about toughness on China, toughness on the world economy, toughness on uh geopolitical risk.

So, you know, expect the market should expect that for the next six months.

They should not discount it entirely though because you know, there's a the the the the reality of this is, you know, China policy is among the most bipartisan parts of the United States politics.

So you know, that that will continue.

It's not all just uh it's not all just uh on the timing of the debates themselves.

What is, what is interesting is two things.

One is that the one takes place before the party conventions, uh the second after and you know, and outside of the traditional uh voting, uh the presidential uh uh the voting Presidential Debates Commission, um both of these uh main challengers see an advantage.

Biden sees an advantage in making Trump look, look weak and all over the place.

And hot headed Trump sees an advantage in making Biden look old and feeble and out of touch and beyond that, both of them are succeeding in their own self interest by keeping Kennedy out whose third party candidacy I think is descending into a niche candidacy, but they're still worried about the impact on votes.

So keeping him out benefits both of them.

That's what you're seeing.

Who's most at risk.

Terry, I'm sorry, say it again.

Who's most at risk from Kennedy, just in terms of whose votes he'll likely take more of, uh depends on the state.

I think actually, there's a lot of uh back and forth about whether he's, uh whether he takes votes from Biden or takes votes from Trump.

I think it's a little bit of both frankly.

Uh but in a, in a, in an electoral college race where it's down to 7 to 10 states.

Firstly, uh and secondly, the, the individual political dynamics in those states are very different.

I mean, Wisconsin and Nevada, let's say, are two very different states politically.

Uh You know, you're gonna get a situation where a Kennedy candidacy might benefit.

Uh might benefit Biden uh more by keeping votes away from Trump in one place uh but have the opposite effect elsewhere.

So it's not easily blown up into a national uh conclusion.

Terry Haines, always great to talk to you.

Thanks so much for hopping on with us and giving us your insight here this morning Pangaea Policy founder.

We appreciate it.