Cracks in the Foundation of Global Growth Start to Emerge

Editor’s note: This article was contributed by Lisa Morrison, principal economist with the CRU Group.

From the standpoint of trade policy and its economic effects, it has certainly been another busy month. President Trump is now threatening another round of tariffs on China. This time, it’s a levy of 10 percent on $200 billion in Chinese imports, which could potentially come into effect during Q4 2018. WTO complaints have been filed against the U.S., and by the U.S., and accusations of harming the world trade order are being hurled from all corners. A few U.S. companies facing higher tariffs on their exports announced their intent to move production overseas in order to remain competitive in those markets and their president has loudly chastised them. Auto retailers are reportedly gearing up to stockpile imports of foreign-made cars, fearing that the potential 25 percent tariff on imported cars will raise costs enough to dampen demand by H2 2019. The glimmer of good news in recent days is a show of free trade solidarity—the EU and Japan have just inked a new trade agreement that will eliminate more than $1 billion in tariffs between the partners. Sadly, it is the negative U.S. actions on trade that spurred the deal to get done and yet another instance where the U.S. seems content to remain on the outside looking in at further trade liberalization.