China on Wednesday urged the Trump administration to “make up its mind” about reaching a trade deal with Beijing, warning that additional tariffs could send negotiations further off track. — South China Morning Post, July 17
We state emphatically,
Nobody Wins In A Trade War
We’re not sure how to even keep score in a trade war. The relative performance of stock markets? Economies?
President Trump likes to look at the bilateral trade deficit. However, during his tenure, the cumulative trade deficit with China has increased by almost $100 billion, 8 percent higher relative to the prior 28 months before he took office.
Trade Deficit Shrinking For The Wrong Reason
In the first five months of 2019, the trade deficit with China is $15 billion lower than the same period in 2018 but it is the result of a reduction of total nominal trade volumes, which is far from the optimal solution of growing exports faster than imports. Both countries are worse off.
Total merchandise trade between the world’s two largest economies fell 14 percent in Jan-May 2019 versus Jan-May 2018.
We don’t think it’s coincidental that global growth is also slowing sharply.
U.S. exports to China fell 19.3 percent while imports from China declined 12.3 percent.
World Of Hurt
If the U.S. and China continue on this path of attempting to reduce the bilateral trade deficit through erecting trade barriers, the global economy, including all Americans, are in for a world of hurt.
The hope of a trade deal anytime soon is fading fast as China digs in (see the SCMP article cited above).
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