Trump-Xi Tinderbox Sparks Business Revamp, Stimulus Chatter

(Bloomberg) --

Financial markets have cheered the prospects for any sort of relaxation of tensions between Presidents Donald Trump and Xi Jinping out of their big confab this weekend, while others are showing they’re not so upbeat and a true pact could be a long way off.

Businesses are getting serious about trade-war contingency plans, and policy makers are talking more and more about stimulus.

Here’s our weekly wrap of what’s going on in the world economy.

Not-So-Great Expectations

The meeting of the Year between Trump and Xi -- with $1.2 trillion riding on it, as Bloomberg Economics analysis shows -- has all the warning signs to be a bit of a dud.

Xi aims to win over Trump without any of his own big sacrifices. Trump is aiming to lure China -- including with a tariff delay -- while staying tough, alongside a Congress that wants more pressure on Huawei. He’s reiterated a threat of billions more in duties, for good measure. It all points to a stalemate for now, though one that could at least bring a pause in hostilities.

Asian Trade Centre executive director Deborah Elms views it this way: “Both sides view themselves as right, both sides view themselves as having the upper hand, both sides are unclear what the other party wants, both sides want win-lose outcomes.”

Read More:

• Supreme Court Refuses to Hear Challenge to Trump’s Steel Tariffs
• Australia Won’t ‘Sit Back’ as U.S.-China Fight Worsens, PM Says
• Pain From Trump’s China Tariffs Spreads, Reshaping Global Trade
• Trade-War Winner Vietnam Is Finding Itself in Trump’s Crosshairs

Easy Feelings

Chief Jerome Powell reinforced the dovish take from the Federal Reserve’s meeting last week, putting an exclamation point on trade uncertainty and the sour data in a speech in New York on Tuesday. Keeping things exciting, other Fed officials offered a variety of views, from calls for a 50-basis-point cut to concerns that any reduction could fuel imbalances.

The Trump-Powell feud wears on, with the president now saying he’d prefer ECB boss Mario Draghi over “stubborn child” Powell, and that he could fire the Fed boss, but hasn’t threatened to do so. At least Powell still has another pal in the White House.

The Reserve Bank of India lost an outspoken official who has ardently defended central bank independence this week, while in South Africa half the seats of central bank’s top leadership are about to be vacant. Iceland lowered interest rates for a second meeting in row, while another six central banks -- including Thailand and Mexico -- kept rates unchanged.

Read More:

• Indonesia’s Finance Minister Sees Weaker Growth, Rate Cut Room
• Australia Is Finally Debating QE, Even If Its Central Bank Isn’t
• Bailey Faces BOE Frontrunner’s Curse in Race to Succeed Carney
• Robots Can Now Decode the Cryptic Language of Central Bankers

Weekend Reading

• Guardians of Money Bristle at Zuckerberg’s New Financial Order
• China’s Increasing Wealth Is Changing the Way People Die
• Add a Million Venezuelans and Your Economy Looks Very Different
• China No Match for Japan in Southeast Asia Infrastructure Race
• Back to 2008 in Zimbabwe as Currency That Wrecked Lives Returns
• India: All Growth, No Jobs (Stephanomics podcast)

Chart of the Week

Only One Major Economy Is Seen Needing Less Power by 2050

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

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