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Jamie Dimon: Trump tariffs, China trade war danger to business, economy

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Jamie Dimon
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  • JPMorgan CEO Jamie Dimon says President Donald Trump’s trade
    fight with China is a problem for American companies.
  • While Dimon said price increases due to the tariffs would be
    detrimental, the CEO said the bigger problem is their
    second-order effects.
  • Businesses could decide to delay capital investment or move
    manufacturing outside of the US in response to the trade war,
    which would hurt US economic growth.

JPMorgan CEO Jamie Dimon has some concerns about President Donald
Trump’s trade
war with China
.

On the same day Trump imposed a 10% tariff on
$200 billion worth of Chinese goods
— adding to the tariffs
on $50 billion worth of goods that were already in place — Dimon
warned that the problems with the “trade skirmish” are not
limited to the direct
cost increase from the duties
.

During a Monday interview with CNBC, Dimon said that while the
tariffs are a “tax on America,” the real danger will come from
companies’ responses to the cost increases.

“Remember, people do other things,” Dimon said. “They have other
supply lines. But it’s a $20 trillion economy. So that’s a
negative isn’t that. It’s confidence, consistency. If people
start reducing investment, if people start moving to supply
chains around, that we have seen already moving around the market
a little bit.”

Dimon’s point is that while the direct effects of the tariffs —

higher costs for businesses
,
higher prices for consumers
— may produce a slight growth
lag, the larger disruption will come from tariffs’ second-order
effects.

The uncertainty over trade policy is already becoming an
undercurrent in business
and
consumer confidence
measure — the most recent being the
Business Roundtable CEO survey, a survey of 141 US CEOs that was
released Monday.

The survey (Dimon is the chairman of the group) found that
roughly two-thirds of executives believed the tariffs would be a
moderate or significant drag on their companies’ capital spending
plans going forward.

“Current trade policies and uncertainty about future trade
policies are having negative effects, especially on capital
investment,” Joshua Bolten, CEO of the Business Roundtable,
said in a release. “Decreases in capital investment not only
impact the operations of Business Roundtable companies, less
spending on equipment and facilities also squeezes small- and
medium-sized suppliers and the millions of Americans they
employ.”

In turn, the slip in confidence and uncertainty around trade
policy could cause firms to delay investment or hiring. Or they
could decide to
move their supply chain
to an area less affected by the
tariffs. The most notable example of supply-chain shift was
Harley Davidson, which announced that
it would move some of its production
overseas to avoid the
European Union’s retaliatory tariffs on American motorcycles.

As more and more businesses start to grapple with the tariffs,
they too
may decide to shift manufacturing
out of the US to avoid the
trade upheaval. A cascade of moves could present more of a
problem for the US economy than the price increases.

While these changes are theoretical, Dimon said further
escalation of the trade conflict could end up canceling out some
of the other, more beneficial parts of Trump’s economic policy.

“So we don’t really think it is a great way to go about it,”
Dimon said. “It could easily offset some of the benefits that
we’ve seen form regulatory reform and tax reform.”

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