We’ve got a volatile stock market, a trade war that shows no sign of ending, pessimistic investors, and other bearish economic indicators. Is it time to freak out yet?
You may have to brace yourself for a new era of worried-broker photos Photo: Richard Drew/AP/Shutterstock Ben: It’s time for another one of our periodic discussions centering on the question: “Is the economy about to be screwed?” At the moment, we’ve got a volatile stock market , a trade war that shows no sign of ending, pessimistic investors, and increasingly disruptive protests in Hong Kong that may presage violence, among other bearish global economic indicators.
Josh: The biggest change is the increase in risks related to China. There is a trade war: A lot of market participants had expected the U.S. and China to get to a deal this year or next , and the breakdown in negotiations and mutual escalations over the last two weeks have convinced people we won’t get a deal. The actions being taken on both sides, like raising tariffs, shutting down agricultural imports, and letting the yuan weaken, are all negative for global growth.
Ben: A piece in the Times today posits that one central difference between this cycle and a superficially similar one back in August 2007 is that lawmakers are actually within their power to end the trade war, unlike the subprime-mortgage crisis. Should that provide us much comfort, given that neither the U.S. nor China wants to be seen as backing down?
It seems clear the Trump administration — even sophisticated people within it, like trade representative Robert Lighthizer — were caught off guard by what they saw as Chinese efforts to recut terms they’d already agreed to. It seems like Xi may not have realized how constrained he is by domestic politics, and that made his negotiating position unclear. Trump’s tendency to change his mind makes it hard for us to maintain a clear position.
Ben: Yes, that seems likely, if we’re looking at a Tiananmen-like crackdown. Business as usual after that would be difficult to maintain for a whole host of reasons. Ben: Is there a particular sign you’re watching out for that would give us more information about where we are and where we’re going, economically speaking?
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