Some of the world’s largest economies are shrinking and all of them are slowing, thanks in large part to the threat of trade war.
Tariffs imposed by the United States and China’s retaliatory tariffs have had little direct impact on growth, to be sure, but uncertainty over trade war has cut deeply into investment plans. Trade in capital goods appears to be driving the slowdown.
Japan, the world’s third-largest economy, shrank at a 0.3% annual rate during the third quarter. Germany’s economy shrank by 0.2% during the third quarter, and government economists think that the fourth quarter will show negative numbers as well, leaving the world’s fourth-largest economy in recession. Sweden and Switzerland also reported negative growth of -.02% during the third quarter.
Trade war leaves companies uncertain of where and when to invest. Manufacturing managers are trying to work out whether to move Chinese production capacity to other Asian nations in order to avoid American tariffs, or whether to stay in China or do nothing at all. The uncertainty appears sufficiently pervasive to cause an economic downturn in some of the most trade-dependent nations.
In separate statements yesterday, International Monetary Fund Managing Director Christine Lagarde and US Federal Reserve Chairman Jerome Powell warned of the danger of slowing global growth. In a surprise turnaround, Powell said that the Federal Reserve’s short-term lending rate was “just below neutral,” in sharp contrast to consensus expectations that the Federal Reserve would raise the rate by 0.75% to 1% over the next year.
The regulators’ caution is well founded, judging from available data on international trade. Overall world trade growth has slowed from about 5%-6% year-on-year to only 2% a year as of September, the last month for which data are published by the Netherlands Central Planning Bureau.
Forward-looking data, though, suggest a steeper drop will follow soon, led by shrinking capital goods exports. German survey data show that the percentage of firms exporting higher exports during the next three months has fallen from 20%-25% at the beginning of 2018 to around zero at the moment.
Germany is the world’s second largest exporter, and is concentrated in capital goods. The US and Japan both have seen a marked slowdown in capital goods exports. US imports and exports of capital goods (excluding autos) were growing at a double-digit clip earlier this year. As of October, year-on-year growth was just above zero.
Japanese capital goods exports have also slowed.
Capital investment has been weaker than expected in the United States. During the second and third quarters, companies in the S&P 500 index spent more buying back their own equity than on capital investment, a disappointing result after a large corporate tax cut.
Thanks for info.
Trump is crashing all parties!
Thanks for info.
Trump is crashing all parties!
USA tried to sit on the Great Wall
USA has a big fall
All its vassals could not put USA back again
Nor did they want to
The vassals were busily freeing themselves
USA tried to sit on the Great Wall
USA has a big fall
All its vassals could not put USA back again
Nor did they want to
The vassals were busily freeing themselves
Trump thought he could out hustle China like those banks in NYC, and then send carrier fleets to intimidate China to sign "good deal". Now humpty dumpty is broken. Who’s going to put it back together? Welcome to a new order indeed. ahahahha
Trump thought he could out hustle China like those banks in NYC, and then send carrier fleets to intimidate China to sign "good deal". Now humpty dumpty is broken. Who’s going to put it back together? Welcome to a new order indeed. ahahahha
The shrinkage has more to do with Israel’s influence on US policy than trade war. US and European and world economy would be in great shape if US had stayed in nuclear deal with Iran and opened relationship with Iran as Obama had envisioned. Israelis are now influencing and damaging Syria, Turkey, Qatar, Ukraine and host of other countries including Russia.
The shrinkage has more to do with Israel’s influence on US policy than trade war. US and European and world economy would be in great shape if US had stayed in nuclear deal with Iran and opened relationship with Iran as Obama had envisioned. Israelis are now influencing and damaging Syria, Turkey, Qatar, Ukraine and host of other countries including Russia.
Yashad Rizvi Speaking like a dark smelling low life slave of the master race. Well done!
Yashad Rizvi Speaking like a dark smelling low life slave of the master race. Well done!
I have been in the China-sourcing business for 30 years, importing machinery parts from China to the US. Let me just ask all the Trump-bashing China-loving people one question: a 3D design software – SolidWorks – costs over $60,000 in the US, and every Chinese factory has it installed, which they can buy on the software black market in Shenzhen or Shanghai for exactly $2.15. Should the US punish China for that?
I have been in the China-sourcing business for 30 years, importing machinery parts from China to the US. Let me just ask all the Trump-bashing China-loving people one question: a 3D design software – SolidWorks – costs over $60,000 in the US, and every Chinese factory has it installed, which they can buy on the software black market in Shenzhen or Shanghai for exactly $2.15. Should the US punish China for that?
I applaud a slow down. Our debt based financial system based on global trade and an addiction to GDP growth is not good for the planet which is getting destroyed, ultimately destroying us humans too. Finally the huge global imbalances are showing up thanks to Trump, and let’s hope that out of the economic pain a better system emerges. The primacy of the US$ has to end, and we need to get back to local economies. It’s insane when countries export for example 50% of their seafood and import the same number again. This is what’s happening today, it’s wasting precious resources and is killing our natural environment. To save humanity we need to be smarter than this.
I applaud a slow down. Our debt based financial system based on global trade and an addiction to GDP growth is not good for the planet which is getting destroyed, ultimately destroying us humans too. Finally the huge global imbalances are showing up thanks to Trump, and let’s hope that out of the economic pain a better system emerges. The primacy of the US$ has to end, and we need to get back to local economies. It’s insane when countries export for example 50% of their seafood and import the same number again. This is what’s happening today, it’s wasting precious resources and is killing our natural environment. To save humanity we need to be smarter than this.
Just because "every Chinese factory has it installed" – you insinuate that every one of these factories bought their
SolidWorks software for $2.15 and, therefore, the US has a right to punish China "for that"?
It’s like saying you carry a very expensive Luis Vuitton handbag; there are many stolen expensive LV handbags; therefore, you are a thief and should be punished, no evidence required?
You provide NO EVIDENCE, not a single shred, on Chinese factories’ use of pirated SolidWorks.
So, let me ask you a question: are you behaving exactly like Trump – accusing without evidence? If so, do you, like Trump, deserved to be "bashed" also?
Just because "every Chinese factory has it installed" – you insinuate that every one of these factories bought their
SolidWorks software for $2.15 and, therefore, the US has a right to punish China "for that"?
It’s like saying you carry a very expensive Luis Vuitton handbag; there are many stolen expensive LV handbags; therefore, you are a thief and should be punished, no evidence required?
You provide NO EVIDENCE, not a single shred, on Chinese factories’ use of pirated SolidWorks.
So, let me ask you a question: are you behaving exactly like Trump – accusing without evidence? If so, do you, like Trump, deserved to be "bashed" also?