If you have been following the news since President Trump announced Liberation Day or tariffs on every country in the world, the heaviest tariffs were place on China. The US is the world’s largest economy and China is second. They both share values in capitalism, although the internal politics are different and for that reason China is an enemy or a friend worth watching. The US is the biggest consumer of Chinese goods, so tariffs make goods more expensive or should have an effect on inflation in the US.

In an article by James Griffiths of Reuters, the Chinese economy grew 5.2% in the 2nd quarter, a better-than-expected rate.

According to official statistics, GDP growth was down from the 1st quarter of 5.4%. One would have expected GDP to be up in the first quarter as companies stocked up on items before the tariffs were imposed.

China has focused on domestic consumers buying more of the goods being produced for the US but now they are more expensive, there are surpluses. In a statement for China’s statistics bureau said consumption is now the backbone of growth.

In addition to the emphasis on domestic spending, the central government of China was ramped up infrastructure spending, added consumer subsidies, the bank rate or interest rates were cut in an effort to cushion the economy from the effects of tariffs.

China is aiming for a 5% growth, but companies such as Oxford Economics believes that growth will only be 4.7% up from 4.3%.

Linking to dividend paying stocks, while China is the second largest economy and is the manufacturing hub for the US, the US only accounts for 15% of the GDP. The country is diversified which means tariffs hurt, it does not mean the economy goes into a tailspin. If you buy a profitable making company that can pay dividends, you can determine where the bulk of the revenues come from and how they will and could adjust to markets being cut off for a period of time. Most profitable companies are reasonably diversified and can continue making profits, it is just not as big till the company adjusts to the markets they were cut off from.

There are more questions than answers, till next time – to raising questions.