Displaying items by tag: US

(Washington)

On the surface, the US seems to have a major upper hand in its trade war with China. Simply put, they export a lot more to the US than we do to China, which means that they have more to lose than we. However, looking closer at the imposition of the US’ attest tariffs, a significant weak spot emerges. That weak spot is that the US has become overly reliant on some very niche but important Chinese exports. Mot of these are things people have never heard of, like carbonate esters and fluorine salts, both used for electric car batteries. Nonetheless though, they are very important, and 297 such imports were recently exempted from the US tariffs.

FINSUM: Barite (for oil and gas exploration) and Ibuprofen, are other crucial imports. This is one of the pressure points where China could simply cutoff supply and the US would be in a difficult position.

(New York)

The whole market (and the media) seems to be worried about a looming recession. Driving that fear are many factors: a surging economy, very high market valuations, and a nearly inverted yield curve. Several big banks and research houses have put out warnings of a looming recession and bear market. However, one of the most prominent, Goldman Sachs, has just gone on the record doing the opposite. The bank says there is only a 36% chance of recession in the next three years, a figure below the historical average. “There has been increasing investor interest in the chance of a recession in the U.S. over the next few years … Our model paints a more benign picture”, said GS economist Jan Hatzius. The bank did note that if a US recession does occur, it will likely drag many developed economies down with it.

FINSUM: Recessions are famously hard to call, so we won’t go one way or the other. That said, there are some signs that a recession is looming. We certainly think the odds are higher than 36% for the next three years.

(Beijing)

President Trump has just ordered $200 bn of further tariffs to be applied to Chinese goods. The Chinese have responded strongly, vowing to retaliate to the measures. The Chinese government said “We have been stressing that talks need to happen on the basis of parity, equality and good faith … What the US has done shows no sincerity and good faith at all”. The Chinese says they will impose tariffs on $110 bn of US goods, or about 85% of all US imports to the country.

FINSUM: These tariffs come just before the US and China were set to hold another round of trade talks. We have no idea how those are progressing, but this is really going to anger the Chinese.

(Washington)

One moment it seems like détente, the next, all out economic war. Well, the latter seems to be stealing the stage this week, as the US and China are trading barbs over trade. The Trump administration is set to impose a fresh round of tariffs on $200 bn of Chinese goods. The new tariffs come just as the US and China were planning to have a fresh round of negotiations on trade. However, China make be backing away from such talks, as a senior Chinese official recently said “China is not going to negotiate with a gun pointed to its head”.

FINSUM: There is so much back and forth and “noise” in this trade battle with China that it is very hard to get a fix on what is actually happening.

(New York)

There is a lot of turmoil going on in emerging markets right now. So much so that many are now considering it a full crisis. So far, though, the problems have yet to materially impact US markets. However, Barron’s explains that there is a mechanism through which EMs could cause trouble for the US and the rest of western markets. Because the trade war with China continues to escalate, the country’s yuan may devalue significantly, hurting all EMs. If this happens, the ripple effects through the global economy might be very strong. India and Mexico seem to be the safest EM destinations at present.

FINSUM: China is big enough to bring down the whole world economy, so the real threat here is the trade war first, and then how EMs compound that problem.