The New Normal: Real Wars and Trade Wars
Fasten your seatbelt: 2019 is promising to be another bewildering and chaotic year.
The last 12 months have helped cement a shift in the global order with the rise of China in the East and populists in the West.
As Marc Champion reports, by mid-2018, economies run by mainstream democratic parties accounted for just a third of the combined output of the Group of 20 nations, down from more than four fifths in 2007. And that was before the election of Presidents Andres Manuel Lopez Obrador in Mexico and Jair Bolsonaro in Brazil.
Technological revolution, income inequality, and what looks like a real clash of civilizations have added fuel to potential flashpoints that weren’t such burning issues this time a year ago.
The most urgent risks now include a new nuclear arms race, trade wars, real wars, and the fragmentation of Europe. There’s also an unpredictable Russia and an even less predictable President Donald Trump.
Each of these have the possibility to ignite turmoil, especially in their “worst-case” scenarios. To help navigate them, we’ve compiled a calendar of some of the key moments to watch, organized by topic. Happy New Year.
Casting blame | In an exclusive interview with Bloomberg News, Treasury Secretary Steven Mnuchin fingered high-frequency trading and the Volcker Rule as factors behind recent misery in the stock market. He left out some other possible culprits, namely, the White Houses’s ongoing trade conflict with China and Trump’s threat last week to shut down the government.
Back from the brink | A last-minute plan to avoid a federal funding lapse at Christmas, the optics of which would be difficult for Trump and his party, is coming together in Washington. Senate Republicans are preparing a measure to avoid a partial U.S. government shutdown at midnight Friday by delaying a fight over Trump’s proposed border wall and extending current spending until early February.
Strategic thaw? | The U.S. State Department notified Congress of a proposal to sell the Patriot air and missile defense system to Turkey, a move that may signal a breakthrough with a NATO ally that is moving closer to Russia. The potential $3.5 billion deal marks an opening gambit by the Trump administration to get Turkey to halt its purchase of Russia’s S-400 missile system, Tony Capaccio and Nick Wadhams report. Turkish government officials, however, said their country is planning to buy both.
Brexit countdown | With 100 days to go before Brexit, Prime Minister Theresa May laid bare the dangers of crashing out of the European Union without a deal. Troops are on standby and warnings are being sent to businesses; her officials hope such details will persuade rebellious lawmakers to get behind her. But there’s no sign of cabinet unity — even today’s long-awaited white paper on post-Brexit immigration delays a key decision due to ministerial divisions.
Sanctions fatigue | Five years after President Vladimir Putin’s military foray in Ukraine triggered Western sanctions against Russia, European governments are losing their appetite for punishing Moscow. But that’s not much help to investors, as the punitive measures are still smothering economic growth, and the risk of new steps from the U.S. has made it much harder for foreign businesses to work there.
What to Watch
- The threat of prison time for former National Security Adviser Michael Flynn has resurfaced after a federal judge offered him a stinging rebuke yesterday and delayed his sentencing. “Arguably, you sold your country out," the judge said.
- Special U.S. representative to Pyongyang, Stephen Biegun, has promised to review whether U.S. citizens should be allowed to travel to North Korea for humanitarian purposes. It's unclear whether this is a step toward assessing the overall travel ban on Americans.
And finally ... Welcome to the new Saudi Arabia: dancing at open-air concerts, women driving after a decades-long ban and gender segregation dissolving. Under Crown Prince Mohammed bin Salman, the 33-year-old de facto leader, the state is giving citizens handouts worth billions of dollars. Yet the party atmosphere masks a darker side to the Islamic kingdom that was thrust into the spotlight with the murder of Washington Post columnist Jamal Khashoggi. The message is: indulge in the fun, just don’t challenge the authorities.
©2018 Bloomberg L.P.