Trump trade war with China may benefit mortgage borrowers

While Trump 2019 trade war with China may have tariffs consequences on some importer prices and agricultural exports, the side effect in recent months has seen mortgage rates with some mortgage rates falling below 4.0%.

Previously, the Fed had highlighted further rate increases but has more recently tempered expectations. In general the mortgage rates follow the ten year treasury note currently at 2.133 % with the market now thinking the Fed will cut rate by January 2020.

The mortgage rate drop is actually likely to stimulate the real estate market which had more recently been declining with increasing interest rates. Real estate plays a large role in the US economy, the wealth effect as well as construction effecting the nations spending and output.

In 2018 the output was $1.15 trillion which was 6.2% of the US GDP. So the question is will the trade war really affecting the economy more than stimulating the real estate sector?

While farmers may hurt in the short term, tariffs subsidies could help and importers like Apple may absorb higher costs. Trump had always wanted the Fed to cut or keep rates low and the trade rebalancing agenda should help to keep borrowers paying less for their mortgage which also may provide a pickup in consumer spending into 2020.

So while on the surface a trade war could be a negative, in conjunction with 2020 election spending, the US economy could do just fine.