It has been a strange week. Trump left Quebec with G7 agreement in hand, destined for Singapore on Air Force One. Trudeau made his statement, he would not be pushed around by the USA. The "Angel" flight nearly turned around. The President threw a tantrum and ordered staff in Canada not to sign the joint statement. War was declared, tariffs were pressed on G7 allies. If only Putin had been there. It could have all been so different. Where are dictators when you need them?
On to Singapore to find one and meet with Kim Jong-un. Trump arrived one day ahead of talks. "Why can't we just get on with it now!", the impatient Trump declared. "It will only take a few minutes to sort this out". Staff explained there was still prep to do. More importantly, world press coverage would be maximized by waiting until the allotted time. The delay was assured. You just have to know Trump's push points to get the right decision.
"Great beaches and great spots to build condos"
When Donald met with Kim, peace was declared in the peninsula. They have great beaches and great spots to build condos. Denuclearization in the province. The US would stop bomb runs on the DMZ. US War Games would end. The bombers were flying in from Guam in a twelve hour round trip. Expensive! Peace and parsimony. Uncle Sam saves money ... and the world need no longer need to quiver with fear about a nuclear holocaust.
Trump extolled the virtues of Kim Jong-un. A "very talented man", a "smart man" and a very good negotiator". "When he speaks, people sit up and pay attention". They also clap a lot. Better to keep you hands in the air for risk of being shot or hit with a short range missile.
Trump loves Kim, true. " He even gave me his phone number" "I said "Call me if you have any difficulties". The calls came but not from the North. The decision to end the war games left South Korea and Japan a little confused. Yep it even came as a surprise to the US military.
The deal with Kim was criticized by many and praised by few. No nukes and the prospects of US troop withdrawal. They can now be sent to the Mexican border to do a proper job, splitting familes. It's a win win. Trump will be handed the peace prize, Beijing will grasp the real prize. It's a good week for peace in the peninsula and a great year for Chinese hegemony in South East Asia ...
Trade Wars with the West ...
Peace in the East, trade war with the West. Trump will talk with Nato next month. "Pay up or we ship out" will be the message. It could be a war zone. For the moment, Trump is marching to a trade war on every front, with the imposition of tariffs on Steel, Aluminium and other things.
The US slapped tariffs on $50 billion of goods from China including semi conductors, machinery and plastics. Excluded from the initial list were flat screen TVs, a concession ahead of the world cup presumably.
The Chinese responded in kind with super charges on farm products, seafood, SUVs and crude oil. Soybeans, pork, chicken and seafood were chosen to hit states supporting Trump. Pork barrel politics takes another twist with Trump in the White House.
"Soybeans, pork, chicken and seafood were chosen to hit Trump states".
China issued a warning to US firms to buckle up! US companies with a foothold in the mainland including IBM and Qualcomm received strong advice to lobby the Trump administration to avoid a trade war. Boeing may be badly hit. More than 25% of world wide revenues were derived from exports to China. It will bet worse before it gets better. Pork and Pickups are already piling up at ports …
The IMF looks on ...
The Fed hiked rates this week with a 25 basis points increase this month and the promise of two more rate rises this year. US base rates could end the year at 2.4%, with 3.5% in prospect by 2020 according to the Blue Dot forecast.
Forecasts for growth this year were pushed higher. The US economy could grow by 3% in 2018. The unemployment rate will fall to 3.6%. Inflation may nudge over the 2% target rate.
The IMP warned this week of the danger of recession in the US, or a significant slowdown in the years ahead. Christine Lagarde is worried about the impact of Trump's economic plan. Spending will increase central government borrowing and debt, with an impact on inflation and the trade deficit. The boost to growth will be short lived. Needless to say the IMF is also worried about the looming trade war ...
"The IMF looks on and warns of rising debt and inflation"
In the UK there was a raft of data released this week, on manufacturing, construction, jobs, earnings, retail sales, inflation and trade. Our monthly review to be released on Monday will provide a full update.
That's all for this week, we will be back next week, with some economics perhaps!
Have a great weekend.
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The Saturday Economist
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