As the threat of U.S. tariffs on China begin to become a reality, one seasoned market watcher says it could soon start to impact companies’ decisions and really weigh on stocks.

“Put this in the context of something that is so hard to know which is the impact that it could have on confidence — whether that’s CEO confidence, consumer confidence. When that CEO decides not to make that additional capex expenditure or decides not to make that additional hire because of the uncertainty around trade, that’s a concern,” Doug Gordon, senior portfolio manager at Russell Investments, said on CNBC’s “Trading Nation” on Friday.

Consumer confidence took an unexpected hit in June. Sentiment over current conditions was level, but consumers’ optimism over the future dipped. Consumer spending accounts for around 70 percent of U.S. economic activity, marking sentiment as an important leading indicator for future growth.

Gordon sees another indicator as proof of the damage from ongoing trade spats.

“Another really good source is from the Fed regional presidents and their surveys and the commentary that they’re getting in real time from businesses in their regions,” said Gordon. A handful of Federal Reserve presidents have already raised the alarm over the trade uncertainties. St. Louis Fed president James Bullard said last Thursday that he’s “hearing full-throated angst” over trade disputes, while Atlanta Fed president Raphael Bostic said earlier in June that optimism had faded to be “replaced by concerns about trade policy and tariffs.”

For all the potential fallout from tariffs, Gordon does not believe disputes will escalate into a full-blown trade war. While the U.S. has the economic might, other countries have a secret weapon, he says. “We have midterm elections in the United States and even potentially in the 2020 presidential elections … that could cause pressure on the Trump administration that might force them to be a little bit more malleable when it comes to what they may or may not give in trade negotiations,” said Gordon.

China has been targeted in its retaliatory tariffs, primarily focusing on agricultural products such as soybeans and on regions that went for President Donald Trump. U.S. tariffs on $34 billion in Chinese goods are set to go into effect on July 6. Chinese tariffs on the same amount in U.S. goods are set for the same day.

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