World trade contracts as US-China trade war drags on
The United States and China could still reach a “phase one” trade deal. That’s the message for investors after top US and Chinese negotiators had a phone call late Monday.
What they talked about: Chinese Vice Premier Liu He, US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer discussed “core concerns” and “reached a consensus on how to resolve these issues,” while agreeing to keep the conversation going, according to China’s Commerce Ministry.
That’s the kind of update traders like to hear, especially as they worry about when the “phase one” deal promised last month will be completed, if ever.
But it comes up against a less rosy development: global trade shrank 1.3% in September, according to the latest data from the CPB World Trade Monitor. That’s a marked decline from August, when trade increased 0.5%.
Timme Spakman, an economist at ING, points out that this is concerning, given that uncertainty on the trade front is “far from over.”
“Trade tensions have slammed the brake on world trade growth in 2019,” he wrote in a note to clients. “While the trade war has directly affected trade flows between China and the US, the fallout has been widespread.”
Societe Generale strategist Kit Juckes puts it bluntly: “World trade is still not growing and will remain a drag on global GDP.”
Remember: That sounds like a gloomier view than the one held by Goldman Sachs, which has said it expects the trade drag to ease up in 2020.