In the Trade Fight Club, More Step Into Ring for Tariff Battles
In the Trade Fight Club, More Step Into Ring for Tariff Battles
(Bloomberg) --
A one-time winner in the trade war turned loser this week, and two Asian nations joined the tariff bandwagon. That’s only part of it amid proliferating trade battles that are pressuring the global economy further.
At this point, even a mediocre U.S. jobs report could seal the deal for a Federal Reserve interest-rate cut at month’s end. So much for celebrating that record-long American expansion.
Here’s our weekly wrap of what’s going on in the world economy.
Truce? What Truce?
Coming off a weekend of Trump-Xi good feelings, financial markets are partying on as they also count on the Fed to save the day. Economists aren’t buying the cheer, with some slashing growth forecasts.
It’s no longer just about the proliferation of battlefields between the U.S. and China, but about more players involved. Consider the match-ups this week:
- U.S. v. China: Still the central duel, Trump said fresh trade talks had already restarted before his G-20 meeting with Xi. The way forward remains as murky as ever: Trump is playing up American victory, and the Huawei front is getting more complicated, as Jenny Leonard and Ian King outline. China is returning with tough talk of its own and still demanding the U.S. lift all tariffs -- even amid supply chain re-jiggering.
- U.S. v. Vietnam: The trade war’s winner racked up a big loss this week. Vietnam, among the best friends of the U.S. in the region, avoided a currency manipulator tag in the U.S. Treasury report last month, but its widening trade surplus on the back of monstrous jumps in exports to the U.S. helped trigger U.S. duties this week of more than 400% on some goods. The country’s prime minister is trying to remedy the situation by instructing his government to try to satisfy the U.S.
- U.S. v. the EU: Europe (alongside China) drew Trump’s ire again this week on currency. And, way back on Monday, the U.S. ramped up its subsidy dispute with the European Union around Airbus and Boeing, adding more EU products to a tariff target list.
- Japan v. South Korea: Trade tensions are contagious. Japan’s wielding the tariff hammer in a generations-long, colonial-era dispute with South Korea that would put another dent in the latter’s ailing tech industry.
- Everything v. the data: Global factory PMIs fell apart this week, and Bloomberg’s Trade Tracker is looking as bleak as ever. Japanese manufacturers are especially gloomy. South Korea cut its growth forecasts. And China’s feeling broader slowdown pain.
Read More:
Doubling Down on Cuts
Australia issued back-to-back interest-rate cuts for the first time in seven years. All signs point to them being in good company.
Friday’s U.S. jobs report is a key moment in the buildup to the Fed decision at the end of the month, though so far it seems there’s very little room for a hold. Expectations are sky-high that they’ll cut. It’s a question not of “if” but “how much.” European Central Bank officials are talking up stimulus even if not for this month, Brazil is seen to cut by as much as a point this year, and South Korea could be in for some easing. Sweden’s Riksbank is rare in its hawkish tone.
New Jobs
The ECB scored a familiar face with IMF chief Christine Lagarde set to take over as president when Mario Draghi’s term ends in October. Here’s what a revamped ECB might look and sound like and how ECB Chief Economist Philip Lanes fits in.
Lagarde’s move also reopens the question why the IMF is always led by a European. Some potential successors are already positioning themselves (or ruling themselves out).
Weekend Reading
- New to the Job, India’s Finance Minister Faces Age-Old Problems
- Corbynomics Stalks Contest to Be Britain’s Next Prime Minister
- Turkey Hooked on Stimulus as Budget Deficits Seen Stuck Over 3%
- Russians Do Without as Government Stockpiles $100 Billion
- How The Rise of Populism Impacts the Global Economy (Stephanomics podcast)
Chart of the Week
To contact the reporter on this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net
To contact the editors responsible for this story: Simon Kennedy at skennedy4@bloomberg.net, Zoe Schneeweiss, Fergal O'Brien
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