One of the big headlines that’s dominated the financial news for the past several weeks has been the looming trade war between the US and China. While this issue is intensely complicated and affects the global economy, it may not always be in the ways you would think. In this post I’ll outline the potential for a full on trade war and look at what the likelihood of that would be as well as briefly discuss protectionist policies. Here we go.
The global economy has done very well this year, increasing at its fastest pace since 2010, but the threat of a trade war is curbing some of that growth. The risk of an all out trade war with China in the immediate future is limited, but there is a threat in the increase of protectionist policies that have ramped up the last several months. By adopting these protectionist policies, which is shielding domestic industries by taxing foreign imports, the global economy is likely to suffer. These policies are problematic for the global economy and will likely lead to economic impact throughout the Americas, Europe, and Asia where they will dull growth throughout those regions.
While this is certainly worrisome, there are some beneficiaries of the US-China trade war, such as India and Sub-Saharan Africa as well as other emerging markets. India once again took the top spot for the fastest growing major economy, and there’s been a boost to the largest economies of Sub-Saharan Africa as the US needs to import from somewhere. Many emerging market economies are expecting growth due to the trade war, but protectionist policies do pose a real threat to the larger global economy. This boost to emerging markets only serves to underline the importance of broad diversification in your investments as there are valuable opportunities that you could be overlooking.
I know there’s a lot to unpack with this issue, dare I say more than a few paragraphs can accomplish, so if there are questions or comments, either comment on the blog or send me an email and I’ll be happy to continue this conversation.