Tariff Threats Rock Global Economy in 24 Hours of Pain

(Bloomberg) --

It’s been 24 hours of pain that changes a lot about the global economic outlook.

President Donald Trump’s threat Thursday to put 10% tariffs on the remaining $300 billion of Chinese imports that aren’t subject to his existing levies sent markets tumbling from Asia to Europe and early in the U.S. on Friday. The new tax would hit American consumers, and businesses are going to face even more supply disruptions. China has already vowed to retaliate if Trump follows through.

Bloomberg Economics’ initial estimate of the additional costs of U.S. tariffs and Chinese retaliation sees both economies taking a 0.2% hit to GDP by 2021. 

Meanwhile, a simmering trade fight between Japan and South Korea is boiling over, putting the health of two Asian export powers at stake. In Europe, concerns are mounting for a hard U.K. exit from the European Union.

Here are the big developments of the past 24 hours:

Charting the Trade War

Tariff Threats Rock Global Economy in 24 Hours of Pain

Bad news for U.S. farmers: China has already started sourcing agricultural products from other countries and temporary measures like this can end up sticking.

Today’s Must Reads

  • Plenty at steak | Trump will formally announce a deal to open up the EU to more beef exports after the bloc carved out quotas from other nations earlier this year.
  • U.K. free ports | Prime Minister Boris Johnson’s government is expanding plans to create free ports in the U.K., which he says will boost the post-Brexit economy.
  • Routing rubbish | Indonesia’s crackdown on waste imports is backfiring as used plastic heading for recycling is clogging ports while waiting for inspection.
  • Ethanol doom | Archer-Daniels-Midland, one of the world’s biggest ethanol producers, says the industry will be in serious trouble if Trump’s trade war doesn’t end soon.
  • Pork chopped | China made its biggest-ever cancellation of American pork, scrapping a purchase of 14,700 metric tons of the U.S. meat that would have been shipped this year and next.

Economic Analysis

  • Apple fallout | The tech giant might endure margin compression of about 200 bps or more if it opted to keep prices stable and absorb the new 10% tariff threatened by Trump.
  • Battered Korea | Japan’s decision to remove South Korea from a list of trusted export destinations will add downward pressure on Korea’s already-ailing economy.

Coming Up

  • Aug. 7: France trade balance
  • Aug. 8: China trade balance
  • Aug. 9: Germany trade balance 

©2019 Bloomberg L.P.

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