We have written a lot about the breakdown of global systems and the process by which the US President is accelerating in the post-WWII and post Bretton-Woods world, but the most recent trade talks prove that the future of chaos has arrived. President Donald Trump announced another round of tariffs Thursday, this time on $300 billion of Chinese goods that are not already targeted. From a purely GDP standpoint this round will only impact one-tenth of a percentage point of GDP.
It has become clear that the new normal will be global trade wars as the US is now pulling out of the global management business.
This announcement by the President jolted global markets, which had bounced back sharply off the Wednesday disappointment and sell off triggered by the Fed rate cut surprise, have a look at out piece on “two words” that shocked the market. While the actual price tag of the latest action is technically only $30 billion, or about 0.14% of GDP, the phychological damagethat could be inflicted comes at an inopportune time, according to a piece on CNBC attributed to Jeff Cox.
While the US economy is still expanding, now at 2.1% in the second quarter, there is more talk that the China economy is now falling below the reported 6.2% level in its most recent report. Our views remain the same and that is the US-China trade war will continue and the impact to the global economy will not be good, so look for a more accelerated slow down. Surely the weaker economies such as Brazil, Iran, Turkey, Argentina and others will suffer even more.