The response of the global financial markets to the trade agreement reached between the United States and China has been very positive, probably excessively so given the relatively limited size of the agreement reached.
Much has been written on the Wuhan coronavirus that causes the respiratory disease Covid-19, but very little is known yet about its impact on the global economy and, in particular, the global value chain. Still, one thing is clear: The shock is bigger than that caused by severe acute respiratory syndrome (SARS), for the simple reason that China is much more important for the global economy than it was then.
The coronavirus outbreak will not lead to recession but the costs of ensuring growth targets will be high
This article shows some evidence of the decrease in merchandise, capital and, to a lesser extent people to people flows.
The agreement between the US and China should not be read so positively in Europe, especially in Germany
While the euro is now a leading global currency and the European Central Bank has become a comprehensive banking supervisor, Europe’s markets have been treading water.
The most concerning aspect for the Chinese economy will still be to hold up domestic demand. The rapidly rising household debt will put further breaks of the households' ability to purchase durable goods
The tentatively agreed deal between China and the United States temporarily stops a dangerous dynamic, yet it falls far short of the negotiating objectives of both sides. US trade policy has become a dominion of the executive branch guided principally by the President’s electoral interests. Meanwhile, China demonstrates its capacity to resist pressure: it will enact structural reforms at its own pace in line with its interests. Sadly, the deal confirms that the United States no longer feels obligated to follow WTO rules, and can induce others to do the same.
The U.S. and China’s negotiations on a phase-one deal seem to have stalled again. The market was already aware of the limited nature of the likely deal, but was still hoping for it. Against this backdrop, the investors have reacted negatively to the increased likelihood of not reaching a deal on December 15. If this is the case, the U.S. will apply additional tariffs on Chinese imports. The obvious question to address, thus, is, what can happen to China under such a scenario?
During this event, Thomas Philippon presented his thesis on market concentration and explained the reasons behind the rising corporate market power in the US.
Concern is growing in the European Union that a rapprochement between Russia and China could have negative implications for the EU.
The EU should invest where it can deliver more value than member states acting alone.