The trade wars could end 10 years of economic growth
While economic indicators may be signaling a slowdown, the most immediate threat to economic stability is the U.S.’ ongoingPresident Trump’s threat to hit all Chinese imports with tariffs is amplifying uncertainty. CEO’s are nervous: in mid-June, over 600 companies and industry groups, ranging from Walmart to Rawlings, sent a letter urging the President to reengage with China.
While the yield curve is currently inverted, the LEI remains positive and the Fed Funds Rate is close to neutral. However, the LEI has started to dip indicating that the economy is cooling. Absent help from improvements in trade or support from the Fed, it could start to flash red in the next few quarters.
The U.S. doesn’t operate in a vacuum and other economies are also slowing. The IHS Purchasing Managers’ Index, which aggregates data from 30 major countries, showed global manufacturing contracting to a seven year low. Key manufacturing hubs such as Japan, China, Germany, South Korea and the UK are all in a slump. Similarly, the OECD’s composite leading economic indicator, an aggregation of 36 large economies, recently fell to its lowest level since September 2009.
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