Will 2019 Be Economically Gloomy or Bright?

By: Joe Mauricio

 

President Donald Trump kept his winning streak last month on the world stage. At the Group of 20 Summit in Buenos Aires, he called for a temporary truce with President Xi Jinping of China in yearlong trade dispute between the two countries.

The United States will continue to impose a 10-percent tariff on up to $250 billion of Chinese goods, but will hold fire on threats to boost that duty to 25-percent in January. China countered with $10 billion in tariffs on American goods, and will lower tariffs on American- made autos and resume buying soybeans and other agricultural products.

The two countries have given themselves 90 days to find a framework from which to construct a new trade agreement. Something they have not been able to do over the past two years. China has not given indication that it will make any big concessions in 2019.

In imposing tariffs, the United States has accused China of walling off markets, requiring American companies to share their advanced technology, stealing intellectual property through joint ventures, counterfeiting goods and outright theft in for Cyber-espionage.

Mr. Trump has been right to press all the issues, though his methods so far have yielded more disruptions than progress. He boasted that trade wars are easy to win, but he is O-2 on that count.

Trade wars tend to be easier to prolong than they are to win or even end, and it is hurting both China and United States. Both nations are heading for economic slowdowns.

The U.S. is slowing because the stimulus from last year’s tax cut won’t be around in 2019 to juice up the stock market or consumer spending. China is slowing down because the demand for Chinese goods were down.

Whatever the rationale for imposing them, tariffs are taxes and American consumers are facing a big hike in the Trump tax in January. Meanwhile, the president has little to show for his trade war. Instead, tariffs prompted some American companies to shift their sourcing of goods from China to other parts of Asia.

The clock is now ticking on the 90-day truce. That still leaves the tariffs in place, even as costs to the economy are rising and the benefits becoming less clear.

If the new year is looking much clearer, will 2019 be economically gloomy?