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The first volley of shots in the America versus China trade war was fired a week ago on July 6, 2018.
America fired first. China fired right back.
U.S. equity markets, after sliding on tariff threats, rallied once again as the first round of 25% tariffs were levied.
If initial tit-for-tat tariffs lead to negotiations and an end to a potential war, the market will continue to rally, and we're probably heading for new all-time highs.
But, look out below if both sides start lobbing the equivalent of tariff nukes, as President Trump has threatened.
That would likely take stocks down hard and possibly lead to a U.S. recession.
Here's what shots were fired and how to prepare for the worst…
Prepare for Chinese Retaliation
On July 6, tariffs of 25% were set to be slapped on imports of $34 billion worth of Chinese imports into the United States, mostly machinery and semiconductor parts.
The Chinese immediately retaliated by imposing 25% tariffs on an equivalent amount of U.S. exports of autos, soybeans, other agriculture products, oil, plastics, medical equipment, and liquid propane.
American negotiators have told their Chinese counterparts there's another $17 billion of goods about to be targeted. The Chinese said they'd match them instantaneously when they're imposed.
But the real threat to a trade war going nuclear is President Trump's hard stand last week to ultimately target more than $500 billion of goods. That's a lot more than China exports to the United States in a year.
There's no way China wouldn't retaliate – it would be a matter of global posturing and standing up to the United States as an economic power as well as a military power.
Of course, that's a frightening prospect, on every level.
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The Shanghai Composite is already down 23% this year because of tariff worries.
U.S. equity markets gyrated wildly in February and scared investors over ensuing months by rallying and sinking, rallying and slipping again, testing important support levels three times.
The rally last week and Monday saved the S&P 500 and Dow Jones Industrial Average from testing those lower support levels once again.
We've been here before. Stocks have rallied every time they've looked like they were going to test and maybe break support levels that almost every institutional investor and trading desk on Wall Street are watching.
This time, the rally came on the heels of actual tariffs being imposed on Chinese products.
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About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
He helped develop what has become known as the Volatility Index (VIX) - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of 10X Trader, Shah presents his legion of subscribers with the chance to earn ten times their money on trade after trade.
Shah is also the proud founding editor of The Money Zone, where after eight years of development and 11 years of backtesting he has found the edge over stocks, giving his members the opportunity to rake in potential double, triple, or even quadruple-digit profits weekly with just a few quick steps.
Shah is a frequent guest on CNBC, Forbes, and Marketwatch, and you can catch him every week on Fox Business's "Varney & Co."
He also writes our most talked-about publication, Wall Street Insights & Indictments, where he reveals how Wall Street's high-stakes game is really played.