E Despite Concerns Over The Possibility Of A Trade War, The Global Expansion Continues To Strengthen

“The global economy has continued to move forward with what has been, so far, a synchronized global economic expansion with few notable exceptions, i.e., Venezuela. While reflecting the improvement in global economic growth, more and more central banks in the developed world are starting to follow the U.S. Federal Reserve in raising interest rates.” (Wells Fargo Global Outlook, April 11, 2018) 

At Least Temporarily, Try To Put Aside The Possibility Of A Trade War

It is virtually impossible to ignore the heightened tensions related to the possibility of a trade war and the myriad of risks associated with a volatile Trump Presidency.

Indeed, if the trade outcomes are dire, the impacts will be felt around the world and of course on virtually every kind of investment. No wonder that the public and many governments are anxious.  

After all, the two largest economies in the world, the U.S., and China, are battling over trade issues. If one expects that the trade fight will be prolonged, it would potentially affect the rest of the global economy. However, it is still expected (or hoped) that a global trade war is unlikely.

Fortunately, there is a glimmer of hope that from Canada’s perspective the NAFTA negotiations may be settled. It may be possible for the Trump Administration to settle for a perceived win on NAFTA that the Canadian government could accept. From the power dynamic in negotiations, however, China will be less a pushover on its trade interests than Canada and Mexico.

The Goldilocks Global Economic Outlook Should Continue

If one could comfortably set aside the trade war risk, the outlook for the global economic economy continues to be very strong.

In broad macroeconomic terms, fiscal policy among the advanced economies has been providing considerable support to economic growth. This is particularly the case in the U.S, where there was a huge tax cut as well as substantial increases government spending. (The Committee for a Responsible Federal Budget estimated that the tax cut alone would cost roughly $2.2 trillion over 10 years.) Of course, this unbelievably strong fiscal boost is being imposed on an economy which is almost fully employed, and which is growing quite well.