Economics: The Costs Of Xenophobia

 

(Drivebycuriosity) - It seems that the Americans are driven by xenophobia. Many are afraid of evil foreign powers who do harm to them and the whole world. The main culprits today are Russia, Iran & China. Hence the Americans, or at least their government, want to punish them, by implying sanctions and tariffs.

Unfortunately these punishments come with high costs - for the Americans. Russia & Iran belong to largest global oil producers of the world. Implying new sanctions against Russia and reviving old ones against Iran would reduce the global oil supply and hike the price of oil. The price of oil already climbed more than 30% in the recent 12 months and could jump above $100 if the supply of Russian & Iranian oil is disrupted.

Unfortunately the US economy is very sensitive to oil prices. It seems that the Americans are addicted to driving and gasoline consume. In January the US retail sales already dropped because Americans spend more money on the gas pumps and bought less other goods & services. If the oil price rises to fast and too high the damage could get much worse.

A trade war against China will harm the US most, especially low income groups. Americans would have to pay much higher prices for many goods, including cars, clothing, electronics and more. Low income families would have a lower standard of living because they would have to spend much more for apparel, hardware, toys and multiple other from China imported goods and could therefore purchase less other goods & services. China also could retaliate and punish US companies like Boeing, General Motors, Apple, McDonald's and many more.

A combination of spiking oil prices with sharply reduced China exports & imports would slow American´s economy and could even lead to a new recession  - a very high price for economic illiteracy and xenophobia.