Trade war, Brexit and global slowdown
The US / China trade war rhetoric continues as policymakers reengage to seek and achieve reconciliation. US President Donald Trump has announced he will shortly see Chinese Premier Xi Jinping to work to achieve a conclusive trade pact. A current detente between the two nations, which follows further tariff increases being postponed until the onset of March, will be under threat if no settlement is realised before then.
Brexit negotiations have been languishing as the UK inches closer to the 29 March deadline (the date set for the UK to withdraw from the European Union). The British Prime Minister has seen her proposed Brexit deal rejected by parliament, before being revised and taken back to the EU. The EU has now considered the revised deal and is set to vote whether or not to adopt it on the 13th of February 2019.
Early signs are that the EU will veto the reworked Brexit proposal. Both the UK and the EU have maintained that a no-deal Brexit would be an unfavourable scenario for both parties and should be averted. At this current late juncture with the March deadline approaching, there is a rising expectation that a Brexit deal will not be arrived at in time and that the negotiation timeline will demand to be extended.
Fears of slowing global growth have and are expected to continue to cause spells of volatility in the market place. Chinese Q4 Gross Domestic Product (GDP) data growth for 2018 was recorded at 6.6%, the slowest pace of growth experienced from the region in nearly three decades.
The International Monetary Fund has further reinforced the impression of slowing global growth by reducing its outlook thereof, citing the on-going trade tensions between the US and China as a significant source of concern.
We have however seen China moving to stimulate and sustain growth within the world’s second-largest economy, through tax cuts and support for lenders (cutting lending requirements).
The US Federal Reserve has now also paused further rate hikes for the time being, which should likewise be supportive of economic growth in the world’s largest economy. The central bank is now evaluating the results of recent tightening measures and the intensifying trade negotiations.