As innovation in technology expands, so does the impact on many traditional industries. Accompanying these advances comes a shift in which jobs are in higher demand, and which jobs are threatened. Uber has revolutionized the car service market. It provides its customers with low prices, convenience, and comfort. This has caused harm to taxi companies, especially in cities like New York with an embedded high demand for taxis. Uber and other similar services have caused devastating change for traditional taxi drivers. New York City has made attempts to regulate Uber and other for-hire services in order to create a more competitive field for taxi drivers. Despite these efforts, it is unclear how long the advances in technology can be controlled. 

New York City taxis operate under a system that is controlled by medallions which are essentially licenses needed in order to operate a yellow cab. A driver who bought a medallion for a low six-figure sum could borrow against its rising value, and then use those proceeds to improve his quality of life. There are some family-run fleet operators who own hundreds of medallions. Unfortunately for established drivers, the cost of a medallion has plummeted since Uber has entered New York. (Berger) In 2013, the cost to purchase a medallion hit $1.3 million. However, by March of 2017 the price of a taxi medallion crashed to its lowest level in a decade when one was sold for $241,000. In January 2017, medallions accounted for 48% of total trips logged by yellow taxis, which is down from 68% in January 2016. Additionally, in 2016 lenders foreclosed on 39 medallions, which is more than triple the amount of 2015. (Agovino) Banks stopped lending to the majority of medallion buyers a few years ago because they were no longer solid investments. Mr. Daus heads a firm with several clients with large medallion portfolios. He believes that taken together the sales show that “the market has already bottomed out,” and indeed there are signs that the market for medallions may have stabilized. New York City closely controls the issuance of medallions, which number around 13,600 which prevents further devaluation. The problem is that given the market declines, many medallion owners owe more than the value of their medallions. (Berger) Once Uber entered the New York City market, too many drivers were chasing too few passengers and that pressure seems unlikely to change.

While it was originally assumed that Uber was only targeting neighborhoods with an already limited supply of taxis, this appears to not be the case.  

This graph demonstrates that there is an increase in Uber drivers in the central business district, which is known to be a hotspot for taxi hailers. From June 2013 to June 2015, Uber’s pickups in the central business district rose from around 175,000 to 1.8 million, while taxi pickups have fallen by around 1.4 million. This means that in a neighborhood where Uber and taxis directly compete, only 13% of the growth in Uber rides resulted from a growth in demand. The remaining 87% have replaced trips that would have gone to taxis. Additionally, passengers tend to use Uber more for late night trips due to its convenience and comfort. Citywide, taxi rides between the hours of 11pm to 5am have fallen by 22% from June 2013 to June 2015, while taxi ridership has declined by 12% in the hours of 5am to 11pm. (“A Tale of Two Cities”) Given the meaningful market share of Uber, it is clear that many passengers seems to favor Uber’s services. 

Uber’s original business approach was geared towards growing quickly so that others couldn’t replicate its model. CEO Travis Kalanick instilled a hyperactive management style that valued speed over integrity. He did this to preemptively wipe out competition by gaining market share and dollar gains in its early days. However, the finish line for this strategy is yet to be in sight. Despite the disruptive effects of Uber’s aggressive pursuit of market share, the overall demand for rides is still surging. Uber has recorded that the number of completed rides in the first quarter of 2017 has tripled compared to the first quarter of 2016. Currently, the momentum of the company coupled with its $7.2 billion cash hoard should ensure Uber’s survival. Looking forward, Uber’s best plan of action would be to engage in vertical integration in order to beat out its competition. This would consist of controlling the newest automobile technology. While Uber does not seem to be willing to lock down its employees using employment contracts, it could dominate the market by eventually owning a fleet of self-driving cars. These vehicles could be the realization of Uber attaining tech-giant status. (Mims)

Uber’s business model relies on the network effect. This means that the indirect values and goods of the company grow as more people use the service. Uber was able to out-compete traditional taxis with lower prices. However, it is impossible to determine how long Uber can maintain these low prices. Uber does offer its customers other advantages in addition to pricing. It provides ease of use through its simplified ordering process, ability to track the driver, simplified payment process, and easy ability to split fares. It instilled practical features such as its method of rating drivers, its consistent branding, its electronic receipts, and its choice of cars which range from standard to lux. The business model of Uber in itself is quite simple. It does not own any cars so all that is required is the use of technology to connect drivers with rides. The company, then, takes a portion of the transaction. In the early stages of the company, Uber spent almost no money on marketing relying on word of mouth. Uber’s initial challenges consisted primarily of: how easily and cheaply competitors could replicate the service. Competitors could improve on Uber’s model in certain cities and take market share. Additionally, the requirement that Uber launch in many cities around the world in order to preempt competition was difficult to manage. Clearly, Uber’s biggest obstacle is competition. (Koch)

In seeking growth, Uber hugely effected the lives of taxi drivers. Some drivers suffered extreme consequences. Nicanor Ochisor was an immigrant from Romania who worked as a NYC taxi driver. Ochisor had bought his medallion almost three decades ago. Initially that was an excellent investment, but after the introduction of Uber, the value plunged by 2018. Despite working 12 hour shifts, he was bringing home less money than before. In March of 2018, Nicanor Ochisor committed suicide. There has been a marked increase in deaths of drivers  given the economic pressures facing many taxi and livery drivers. Between January of 2018 to May of 2018, 4 drivers took their own lives. (Fitzsimmons) The situation has become so drastic that it has become clear that regulations are needed to prevent Uber and other similar services from destroying the taxi industry. 

To combat Uber’s growth, the New York City Council created a cap on the number of for-hire delivery and transportation vehicles in the city. Additionally, in August 2018 the council put a halt on issuing new for-hire vehicle licenses for 12 months giving the counsel time to study the rapidly growing industry. Companies like Uber and Lyft will be required to provide the council data on usage and charges or they will face a $10,000 fine for noncompliance. New York is Uber’s most profitable market, yet it is the first United States city to propose a temporary restriction on the total number of vehicles. Yellow taxis are a staple of New York and the council is fighting to keep them afloat. Uber is arguing that creating a cap will leave drivers without an income. It will also disproportionately harm low-income and minority residents in New York’s outer boroughs who lack easy access to many forms of public transportation as well as access to taxi services. (Wodinsky) Despite Uber’s protests, New York does plan on mandating benefits for Uber drivers with these new changes. 

New York City regulators are planning on raising wages for Uber and similar services. Uber is known to be less expensive and more comfortable than taxis, but many of the drivers are struggling to earn a good living given the pay structure. Under the new regulation, if a driver’s profit fall below $17.22 per hour over the course of a week, the companies will be required to make up the difference. Currently, in New York City, about 40% of drivers have incomes so low that they qualify for Medicaid while about 18% qualify for food stamps. Some drivers bought vehicles believing the claim that they could make up to $5,000 during their first month of driving. They now feel trapped as their earnings fall short. (Fitzsimmons, Scheiber) Uber’s objection is that this will cause a rise in prices for consumers. This impact on pricing actually helps the regulators’s initiative. If Uber must pay their drivers higher wages, then the number of drivers hired will be limited and the cost of Uber will go up. Being unable to hire more drivers will enforce the cap on Uber and higher Uber prices will create more equal competition between Uber and taxi drivers. 

Taxi drivers in European cities have also faced decline in business due to Uber. The responses there have been more aggressive. In London, drivers brought streets around Trafalgar Square to a stop while honking their horns and holding signs in protest of the new technologically savvy driving services. In Madrid, hundreds of drivers marched through the streets blowing whistles. One banner read, “For the security of passengers and the future of taxis: Uber is illegal.” Also in Madrid, protestors surrounded and pounded on two black sedans that were unlicensed taxis. The front and rear windows of the one of the cars were broken. In Italy, taxi drivers handed out leaflets denouncing Uber and hung a banner that read, “Illegality Reigns Sovereign!” In Naples, dozens of taxi drivers protested in the city’s center, blocking traffic for hours. In Paris, hundreds of cabbies led strikes causing traffic jams and altercations between taxi drivers and drivers for other services. Finally, protests spread as far as Rio de Janeiro. While the city prepared itself for the 2014 World Cup, dozens of taxis formed lines and moved slowly along the Copacabana. (Fleisher) Clearly, taxi drivers around the world are prepared to fight for their jobs.

Uber was created as an industry disrupter seeking to defeat many of its competitors. Uber’s goal was to revolutionize the for-hire car service industry. The strategy was to grow quickly and gain a large customer base. Uber accomplished its goal by starting up in cities all over the world and by providing low prices. Unfortunately, this strategy decimated traditional taxi companies and its drivers and owners. Taxis have experienced massive declines in ridership which is especially felt in New York City where Uber has one of its largest customer bases. While regulations have been put in place to help the taxi industry, it is unclear whether these trends will ever be reversed. 

https://www.wsj.com/articles/with-kalanick-out-ubers-troubles-are-just-beginning-1498049054

https://www.entrepreneur.com/article/286683

https://www.cbsnews.com/news/how-much-is-a-nyc-taxi-medallion-worth-these-days/

https://www.wsj.com/articles/is-the-market-for-new-york-taxi-medallions-showing-signs-of-life-1516228199

https://www.nytimes.com/2018/07/02/nyregion/uber-drivers-pay-nyc.html

https://www.theverge.com/2018/8/8/17661374/uber-lyft-nyc-cap-vote-city-council-new-york-taxi

https://www.nytimes.com/2018/05/01/nyregion/a-taxi-driver-took-his-own-life-his-family-blames-ubers-influence.html

https://www.wsj.com/articles/londons-black-cab-drivers-protest-against-taxi-apps-1402499319

https://www.economist.com/united-states/2015/08/15/a-tale-of-two-cities

It is no secret that Uber is more popular in American cities than European cities. However, the company is making attempts to change this. Uber has recently returned to Germany. Previously, Uber had been forced out of Germany due to not following German regulations. This time, the company is trying to make amends. 

Germany requires all drivers to pass health and driving tests, and to receive a business licenses that includes a bookkeeping exam. Additionally drivers must return to a home base between trips, which result in limitations in the number of rides that can be made. Car-pooling services are not allowed. When Uber first arrived in Germany, the company didn’t inform local officials that it was coming and so as soon as the app went live, anybody was able to transform his or her car into a taxi, even if they didn’t have a license. Uber has been trying to make amends since this faulty communication. The CEO, Dara Khosrowshahi, has been to Germany twice in the past year in order to apologize for the company’s past behavior. Uber has also vowed to follow all of Germany’s regulations, as well as incorporating electric cars into Uber’s fleet out of respect for the German government’s fight against air pollution. Uber plans to re-establish its service into Germany by the end of 2018.

Uber will first return to Düsseldorf. The company has chosen this town because customers have logged into the app more than 150,000 times since January and this was a period of time when there weren’t even any cars on the road.

Re-entry will not be especially easy for Uber. The company faces more competition than it did when it started in Germany three years ago. There is now a service owned by BMW called DriveNow that lets people rent a car with an app for short trips around cities. Moia is testing a ride-sharing bus service in Hamburg. MyTaxi is a taxi-dispatch app that is widely used in Germany. Lastly, Taxify also provides rides in European cities. 

In addition to other competing apps, Uber is also facing major backlash from German taxi drivers. Last month dozens of taxi drivers protested outside of Uber’s office. They blasted their horns and stopped traffic. The Düsseldorf police said there have been reports of six incidents between taxis and Uber drivers. These reports include incidents of taxi drivers verbally abusing and harassing Uber drivers. 

If Uber were able to successfully expand into Germany, this would result in great things for the company. Germany is the world’s fourth-largest economy and the largest in Europe. It has multiple densely populated cities and has a wealthy, tech savvy population. Currently, in London, the company is involved in a lawsuit that would require a minimum wage and to provide holiday time to drivers. In Spain, taxi drivers have persuaded politicians to limit the number of Ubers on the road. In Italy, the company has been kept out due to regulations. It seems as though Germany may be Uber’s greatest hope in expanding into European markets. 

Wall Street and its investors are anxiously anticipating the results of the current midterm elections. The expected results are that the Republicans will win the Senate and that the Democrats will win the House. Many investors are hoping for this result as it would cause gridlock. This means that the existing economic agenda would stay relatively the same. If Democrats were to win both houses, there would be sharp sell-offs. If Republicans were to win both houses, then stocks may rally in favor of tax cuts. 

Many of the major banks agree that there will be a split in Congress, however each bank has their own interpretation of how the market will react to this split. The Bank of America Merrill Lynch believes that base case is a boon for equities since markets typically do well under gridlock. Goldman Sachs believes that there will be modest reactions, weaker fiscal stimulus and growth, and no major changes in trade policy. Morgan Stanley believes that a trade risk will be present regardless of the outcome of the election. (Franck)

If there is an upset and the Republicans win both houses, US equity markets will rally broadly as companies sensitive to tax cuts and de-regulation will outperform. Additionally, in bonds, 10-year Treasury yields most likely would break the high end of their recent range. The win would validate the current administration’s aggressive trade approach. Non-US equity markets would be likely to underperform since investors will pursue deregulation and more tax cuts. Finally, the win would result in a strong dollar, which would be bad for emerging markets. (Rapoza)

In opposition, if the Democrats were to win both houses, then deregulation would slow down. It would also create a higher chance of Trump’s impeachment and the creation of legislation designed to constrain Trump. (Rapoza)

There may still be some uncertainty about the elections which is causing many investors to hold back on making big bets just in case there is a surprise outcome. Despite this, Wall Street realistically has very little to worry about. In midterm elections since 1946, the S&P 500 Index has had an average price return of 16.7 in the twelve months following the elections. (Jay, Veiga) While Wall Street as a whole will not be harmed, there may be minor political shifts causing shifts in investments. For instance, shares of gun makers may change as Congress reshapes gun control laws. Additionally, there may be more possible investments in infrastructure because that is an area when Trump and the Democrats may be able to find a common ground. Adversely, pharmaceuticals could suffer because both parties favor drug price control. 

The likely outcome of the midterm elections will be gridlock. This will result in the predictable rise in investments post midterm elections and then subside to the United States continuation of its economic agenda. 

Sources:

https://www.cnbc.com/2018/11/06/heres-what-every-major-wall-street-firm-expects-from-the-election-and-how-to-play-it.html

https://www.forbes.com/sites/kenrapoza/2018/10/04/midterm-alert-what-happens-if-republicans-actually-keep-congress/#694cc3857412

https://www.detroitnews.com/story/business/2018/10/18/midterm-elections-stocks/38201061/

Amazon has revolutionized online commerce. It has created a monopoly-like business with the online sales of books and has aggressively expanded into other product categories. In addition, it has enticed countless customers with its two day prime shipping option. Recently, Amazon continues to lead the way for modern US businesses with its decision to raise the minimum wage from $11 to $15. This move was partially enacted to rectify the bad reputation it earned given Amazon’s harsh treatment of its workers. However, Amazon does not want to lose its competitive advantage by paying a higher minimum wage, and so it is now lobbying for a national minimum wage hike. Initially the rise may result in the loss of customers due to higher prices on goods, but it could help Amazon entice new employees. The increase in minimum pay will create both positive and negative effects for the company. 

Amazon has been notorious for its poor treatment of workers. In 2015, interviews with current and former employees revealed Amazon’s highly competitive and hostile work environment. Senior managers had incentives to attack one another’s ideas in meetings believing conflict creates innovation. Workers were penalized or pushed out for suffering a cancer diagnosis, miscarriage, or other personal challenges. However, it was reported that there were many opportunities to move ahead in the company. Amazon is all about growth and so it is not a good environment for a workers who are content to stay in the same position. Consequently, Amazon maxes out its pay scale after several years at each tier in an effort to promote forward momentum. In addition, the company was known for providing good benefits which contribute to total compensation. (Adams) While Amazon’s aggressive culture did have some redeeming attributes, its constant need for growth resulted in a cutthroat work environment. 

Amazon treated its lowest paid employees the most poorly. There have been numerous reports of warehouse workers who have suffered from workplace accidents/injuries and who have been fired or put on unpaid leave and so been unable to produce income. There are other cases of warehouse employees who couldn’t overcome the fatigue of the job and so were forced to quit before they got injured. (Sainato) According to the Guardian (https://www.theguardian.com/technology/2018/jul/30/accidents-at-amazon-workers-left-to-suffer-after-warehouse-injuries), “Amazon’s warehouses were listed on the National Council for Occupational Safety and Health’s ‘dirty dozen’ list of most dangerous places to work in the United States in April 2018. The company made the list due to its pattern of unsafe working conditions and its focus on productivity and efficiency over the safety and livelihood of its employees.” (Sainato) Amazon’s reputation as a power-hungry corporation with little regard for its workers has resulted drastic changes such as the change to its wage scale. 

Amazon has expanded its markets into many different regions of the US economy. According to the Forbes (https://www.forbes.com/sites/lauraheller/2016/11/30/amazons-growing-stranglehold-on-the-us-economy/#d407c09eb408), the Institute for Local Self-Reliance states, “Today, half of all U.S. households are subscribed to the membership program Amazon Prime, half of all online shopping searches start directly on Amazon, and Amazon captures nearly one in every two dollars that Americans spend online. Amazon sells more books, toys, and by next year, apparel and consumer electronics than any retailer online or off, and is investing heavily in its grocery business.” (Heller) Amazon’s tactic is to draw members in using Amazon Prime, which gives exclusive offers and better prices. Consequently, Amazon seeks to be the website that consumers look to first for the best deals. (Heller) Once Amazon had gained a substantial number of Prime Members, the company announced in April 2018 that it would raise the cost of membership from $99 to $119. This helped drastically improve Amazon’s profitability. The company’s net income for the first quarter of 2018 was $1.63 billion, compared with net income for the first quarter of 2017 of $724 million. A major factor in this jump in profit is its cloud computing and advertising businesses as well as the boost to the cost of Prime members. Profits are expected to continue to grow. (Wingfield)

Amazon’s rapid growth created the necessity to hire more employees. However, the growth in jobs came mostly at lower levels. Amazon is leading the shift in the United States’ economy to technology focused jobs. According to USA Today (https://www.usatoday.com/story/tech/columnist/2017/01/13/amazons-jobs-creation-plan-comes-amid-labor-pains/96488166/), “The impact is felt far beyond Amazon, labor and retail experts said. The breakneck growth of Amazon is ‘upending’ the retail industry, which accounts for one out of every eight jobs in the USA, says Stacy Mitchell, co-author of a recent report that concluded Amazon eliminated about 149,000 more jobs in retail than it has created in its warehouses.” (Swartz) While Amazon may be creating jobs in its own market, it exerts a downward pressure on wages as competitors that are pressured by Amazon’s low prices are forced to cut costs too. Their growth doesn’t necessarily make up for the losses it’s causing. This graphic demonstrates the rapid increase in employees that Amazon has hired from 2007 to 2018.

 

Amazon’s work force has grown by more than 6x since 2017. While the growth has been rapid, the pay for low-wage workers has not increased until 2018. 

Consequently, while Amazon is creating jobs, the type of jobs it is creating is not beneficial for the overall economy as these jobs do not provide a livable wages. This exerts pressure on government aid where costs are paid by the taxpayers. Additionally, many of the jobs that are being created are only part-time positions which cannot support an individual, let alone a family. Amazon is just one example of a major corporation trying to characterize its underpayment of workers as a boost for the American economy. Walmart is another culprit. (Picchi) According to CBS News (https://www.cbsnews.com/news/amazon-walmart-retail-hiring-wages/), “In its latest hiring plan, Walmart said it will add 10,000 retail jobs. The company didn’t immediately return a request for comment about what those jobs will pay or what types of roles they’d represent. The typical Walmart sales associate with two children earns little enough to qualify for government assistance, such as food stamps, Medicaid and home energy assistance, Making Change at Walmart said.” (Picchi) These individuals have jobs yet receive the same government assistance as an unemployed individual would receive. Amazon and Walmart are creating these jobs not to boost the economy, but to boost their profitability. Unfortunately for Amazon, this story has been analyzed and reported. Therefore, in order to boost its public image, Amazon raised the minimum wage from $11 an hour to $15 an hour. 

Amazon sought to rejuvenate its reputation with the wage boost. However, the company didn’t want to lose its competitive edge by raising wages, and so is lobbying the rest of the country to follow suit. Amazon did not lead other retail chains with this increase. Last year, Target announced that it would raise its minimum wage to $15, Costco raised its minimum pay to $14 an hour, and in January of 2018, Walmart stated that it would raise its starting wages to $11 an hour. The federal minimum wage is $7.25, however it varies from state to state. In California, it will rise to $15 on January 1st. According to Sen. Bernie Sanders, it was inevitable that Amazon would increase minimum pay levels. He is quoted in Amazon to Raise Minimum Wage to $15 for All U.S. Workers, stating, “‘I think they saw the writing on the wall. I think they saw the calculation that it was indefensible that a man whose wealth is over $150 billion be able to continue paying workers wages that are so low that they are forced to rely on federal benefits.’” (Weise) The public is feeling wealth inequality more as the gap continues to grow in the United States and, the pressure for change is growing.

Amazon may appear to be creating positive changes for its workers with this wage boost, however Amazon may in fact be cutting other benefits in this process. The minimum wage was increased to $15 an hour, but another new policy eliminated bonuses and the ability to receive stock in the company for warehouse workers. Amazon had utilized a restricted stock unit program which gives shares to workers who have stayed with Amazon for a certain amount of years. This program will now be phased out. (Pisani) Further, there are Amazon employees who are against the increase in minimum pay. According to The Washington Post (www.washingtonpost.com/business/economy/amazons-15-minimum-wage-doesnt-end-debate-over-whether-its-creating-good-jobs/2018/10/05/b1da23a0-c802-11e8-9b1c-a90f1daae309_story.html?utm_term=.2ef42b164dd0), employees voiced these concerns: “They asked why people who had been toiling in the company’s warehouse for years would now be paid similarly to new employees and temporary holiday help.” (Long) These offsets in benefits, as well as the perceived advantage for new employees over old employees, harm the positives created by a higher minimum wage. It seems clear that companies will attempt to get some concessions for raising salaries through cuts in different areas. 

Amazon is a powerhouse in terms of efficiency and profit growth. The company is revolutionizing the future and the technological shift in the American economy. With this leadership comes a responsibility and the public has begun to hold Amazon responsible for its treatment of workers. Amazon has recently announced that it will be raising its minimum wage from $11 to $15. This may be the result of a movement for livable wages in the United States. However, the impact of Amazon’s contribution to the prevalence of low wage jobs will not simply be remedied with this increase.

Sources:

 

https://www.nytimes.com/2018/04/26/technology/amazon-prime-profit.html

https://www.forbes.com/sites/lauraheller/2016/11/30/amazons-growing-stranglehold-on-the-us-economy/#d407c09eb408

https://www.forbes.com/sites/susanadams/2015/08/18/how-people-who-work-for-amazon-really-feel/#550db6343305

https://www.theguardian.com/technology/2018/jul/30/accidents-at-amazon-workers-left-to-suffer-after-warehouse-injuries

https://www.statista.com/chart/7581/amazons-global-workforce/

https://www.usatoday.com/story/tech/columnist/2017/01/13/amazons-jobs-creation-plan-comes-amid-labor-pains/96488166/

https://www.cbsnews.com/news/amazon-walmart-retail-hiring-wages/

www.washingtonpost.com/national/amazon-to-cut-bonuses-stock-benefits-as-it-raises-wages/2018/10/03/03248dc4-c757-11e8-9c0f-2ffaf6d422aa_story.html?utm_term=.d635eb0e156d.

www.washingtonpost.com/business/economy/amazons-15-minimum-wage-doesnt-end-debate-over-whether-its-creating-good-jobs/2018/10/05/b1da23a0-c802-11e8-9b1c-a90f1daae309_story.html?utm_term=.2ef42b164dd0

It is not surprising that President Trump has launched of tariffs against China. However, he is now acting on these threats on a very large scale, so the consequences are being felt. The United States has, so far, implemented duties on $400 billion of Chinese imports. This course of action has caused China to retaliate by announcing tariffs on $60 billion of US goods. When tariffs raise the price of imported goods, costs become inflated for businesses and so prices go up and demand goes down. This would cause harm for the US economy and could ultimately result in an economic decline. 

In China, stocks and currency have already been harmed due to concerns about an upcoming trade war. The Shanghai composite index is down 18.657. Trump has threatened to expand tariffs to cover basically all imports from China to the US. China is trying to avoid following Trump’s lead as its economy is already feeling the negative effects of these tariffs. China believes that escalating the trade war will cause harm to the global economy. If Trump continues to push the country, China may retaliate by swamping US firms operating there with red tape or by using a weaker yuan as a weapon to create demand for Chinese products. President Xi Jinping has become powerful by elevating China into a global power and so he can not afford to let the US destroy its progress. President Trump does not seem like he will back down anytime soon, however, as he believes that he can win in this dangerous game of chicken. 

Opposingly, many US investors don’t seem concerned about the brewing storm with China, as the Dow Jones Industrial average is up 6.96% this year. Others are preparing for the worst in the belief that these tariffs will cause the US economy to decline. The CBOE SKEW Index rises when option trades signal the concern of an unexpected event that could have a major impact. This index is close to the highest that it’s been since records began in 1990. Part of this fear stems from the reality that no one knows how far these trade wars will actually go. Many American companies operating in China have already started to confront obstacles and are becoming increasingly worried about Chinese retaliations. These companies are faced with tariffs as well as increased inspections and slower customs clearance.

This graphs illustrates the specific industries that would face the most harm due to the disputes with China. However, Trump is attempting to help these industries. He has stated that he would may impose tariffs on basically all Chinese goods if the Chinese government retaliates on the current tariffs by targeting US farmers and workers. Trump has announced $12 billion in aid to US farmers to offset retaliating tariffs. This may not be enough for workers who are putting their livelihoods in the hands of Trump’s negotiations. 

While the United States has yet to be harmed economically due to the trade wars with China, the future is uncertain. There are signs that point to an economic decline. Many of future concerns stem from how far Trump is willing to take these tariffs and the extent to which China will retaliate.