Neil Shearing, chief economist at Capital Economics, recently published a provocative and timely client note that we’d like to share with you. It provides a historical perspective on the deterioration of U.S.-China relations, and what could come next. The following provides an edited excerpt. Enjoy.
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The decision last week by the US government to impose additional tariffs on imports from China shouldn’t come as a surprise. The political dynamics on both sides of the trade war made it more likely that the conflict between Washington and Beijing would escalate rather than recede. Indeed, we had already factored the new tariffs announced by President Trump into our forecasts.
However, lingering in the background is a more fundamental concern – namely that we may be witnessing the end of globalization. If so, the rapid increase in cross-border movement of goods, services, capital and people that has been the defining feature of the global economy over the past two decades may be about to reverse – with macroeconomic implications that would extend well beyond the narrow impact of tit-for-tat tariffs.
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