Jul 2, 2019

Trump-Xi Love Arrives Too Late to Repair Trade-War Damage

Michelle Jamrisko, Bloomberg News

A container ship is docked next to gantry cranes at the Yangshan Deepwater Port, operated by Shanghai International Port Group Co. (SIPG), in this aerial photograph taken in Shanghai, China, on Friday, May 10, 2019. The U.S. hiked tariffs on more than $200 billion in goods from China on Friday in the most dramatic step yet of President Donald Trump's push to extract trade concessions, deepening a conflict that has roiled financial markets and cast a shadow over the global economy. , Bloomberg

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Global trade is starting to exhibit war wounds that not even a U.S.-China ceasefire can heal.

Bloomberg’s Trade Tracker is as bleak as it’s been since its start in November, thanks in part to sour purchasing managers’ indexes from the battered industrial engines of Asia to sluggish Europe, and then on to the barely expanding U.S. factories. It was a blue Monday that threatens to carry through this week and beyond. Here are some other warning signs:

Nine of the 10 gauges tracked by Bloomberg to assess the health of global trade — across shipping, sentiment and exports — are below their average midpoint, including three under their long-run normal ranges and the rest threatening to join them. The downturn in the electronics cycle has dealt a special blow to export powerhouses South Korea and Taiwan.
Morgan Stanley analysts kicked off the week reducing their global growth forecasts, though they probably won’t be alone: Economists scoffed at implications that the weekend’s détente between Washington and Beijing could heal the global economy’s damage, and they’re increasingly connecting the sagging sentiment with declines in orders and investment.
The latest wave of numerical doom isn’t finished yet. Singapore’s delayed PMI is due out Wednesday. If the big Asian trading hub shows another contraction as expected, it will be another signal that the region’s resilient one is also now seeing fractures.
And, of course, later this week is that granddaddy of economic reports — U.S. monthly employment figures — that could give more hints that the world’s No. 1 isn’t immune to trade tensions and an aging business cycle. Duke University professor Campbell Harvey is even predicting a U.S. recession in 2020 and doomsayer economist Nouriel Roubini called it “a scary time.”

Charting the Trade War

An S.O.S. to the World: The shipping category of Bloomberg’s Trade Tracker shows the effects of a trade war that’s weighing on exports.

Today’s Must Reads

Washington vs Brussels | U.S. pads out its tariff hit list in a long dispute with the European Union over subsidies to Boeing and Airbus, which warned of a “lose-lose situation.”
Huawei lobbying battle | Trump’s Huawei flip-flop followed pressure from the U.S. semiconductor industry that argued banning the Chinese tech giant hurt America’s economic and national security.
Australia cuts rates | The nation’s central bank says more easing may come because “risks to the global economy are tilted to the downside” amid the uncertainty tied to trade disputes.
Ship mystery resolved | A ship loitering in Chinese waters for weeks, unable to unload its cargo of Canadian canola, fulfilled its mission just as the U.S. and China agreed to their truce.
China still competitive | Chinese Prime Minister Li Keqiang is confident that the trade war won’t mean massive production moves out of the country to avoid tariffs.

Economic Analysis

Conflicting signals | The G-20 gave investors a reason to buy riskier assets. But red flags also flew over Osaka
Draghi’s easy feeling | The ECB may telegraph a cut in July as the outlook worsens, then do so in September

Coming Up

July 3: U.S. releases trade data for May, 8:30 a.m. in Washington

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To contact the author of this story: Michelle Jamrisko in Singapore at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss