Throughout the second quarter there were hopes that the U.S. administration would finally understand that imposing tariffs, first on steel and aluminum and then on a long list of Chinese products, could only be bad for both the U.S. economy and the global economy. This hope quickly faded. The trade war between the U.S. and China began on July 6, when President Trump confirmed that he was imposing tariffs on $34 billion of Chinese products. An eye for an eye, a tooth for a tooth: as promised, China’s leaders quickly responded by imposing tariffs on the same amount of goods. However, the Americans then raised the stakes, announcing new tariffs on products worth another $200 billion, only to be quickly matched by the Chinese. With the improvisation and chaos that seem to govern decision-making at the White House, it is impossible to have any sense of where this trade war will end. What we do know is that an economic shock is inevitable.
In the fourth quarter, the economic and political news was marked by a synchronized global economic upsurge, rapidly expanding corporate profits, the adoption of a sweeping tax reform bill in the U.S. and somewhat eased geopolitical tensions.