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KEY POINTS The markets are currently in a multi-day selloff "freak out" over an escalation in the U.S.-China trade war.

But is it justified? No, argues Jake Novak.

There are three main reasons why this and other major U.S. market selloffs connected to the trade war are overblown, even for the companies and consumers that have more relative China exposure.

Trader Thomas Lee works on the floor of the New York Stock Exchange, Monday, Aug. 5, 2019. Richard Drew | AP

The markets are currently in a multi-day selloff "freak out" over an escalation in the U.S.-China trade war. But is it justified? No. There are three main reasons why this and other major U.S. market selloffs connected to the trade war are overblown, even for the companies and consumers that have more relative China exposure. Here they are.

The economy still looks good

America is enjoying full employment, decent wage growth and no significant inflation. When the trade and tariff battles started, those were all factors that a large number of the trade doomsayers predicted would be a memory by now. On the down side, the recent second quarter GDP report did show the economy was slowing down to 2.1%. But that was still better than expected, and the economy is objectively still growing at a solid pace. Plus, can we really say the tariffs and trade war were a major reason for the lower GDP compared to last year? At best, that's a matter of debate, and the numbers seem to show other factors like the drag on the GDP from the continued grounding of the Boeing MAX jets had a bigger impact. None of this means the trade and tariff situation is helping the overall economic picture. But the macroeconomic picture is still very good and far from panic selling territory.

Eating the costs hasn't been so bad

If you haven't seen higher prices at your local appliance store, car dealership, or even while shopping on Amazon since the tariff war began, you're not alone. In fact, import prices in June actually fell by 0.9%, the biggest drop in six months. The bottom line is the consumer isn't hurting overall because of tariffs. How is that possible when tariffs should be driving up costs for everything? President Trump is partially right when he points to China's currency devaluation as its way of eating the costs of the tariffs and not passing them on to U.S. consumers. But another big reason is that U.S. companies that rely on China for some key supplies are also eating those costs. And while they certainly don't like doing that, the effects on their bottom lines haven't been disastrous. Even a company like Caterpillar, which reported earnings last month, can't say the tariffs are a major reason for its woes last quarter. Caterpillar told us so in that report, when it said that tariffs were responsible for just $70 million of its $12.2 billion in total operating costs last quarter. That's less than 0.6%. Oh, and Caterpillar also posted a profit and increased year-over-year sales and revenue. To be sure, the tariffs and trade war are cutting into Caterpillar's bottom line. And yes, things could get worse. But to say tariffs are taking a "major" bite out of the company really seems like a stretch, even as Caterpillar is being used by many pundits and reporters as some kind of poster boy for tariff pain in America. The same is true for companies like GM and Ford. The tariff costs are hurting, but not in a serious way on a percentage basis relative to their total costs.

Manufacturing was already down