Domestic politics might worsen the US-China trade conflict, says CME Group chief economist
Potential tit-for-tat trade war will derail global growth and rock financial markets, says Blu Putnam
A potential tit-for-tat trade war between the world’s two largest economies will hurt global growth and rock financial markets, said the chief economist at CME Group, operator of the world’s largest futures exchange. And US-China trade relations are at the risk of sliding into this scenario because the two countries’ leaders might have more to consider in terms of domestic politics, than in short-term economic impact.
In a one-on-one interview with the South China Morning Post in Hong Kong, Blu Putnam said the global economy had been experiencing synchronised growth for the first time in about a decade, with growth of 4.2 per cent projected for 2018. But a trade war between the United States and China will disrupt trade flows and dent growth, which will incur great volatility in equity markets.
“Right now, we are in the rhetoric phase,” he said. “The market is still digesting the escalating trade-related rhetoric between the two countries. Nothing has happened so far.”
Asian stock markets closed higher on Monday, with indexes in Japan, Hong Kong, Australia, Shanghai and South Korea all snagging gains.
But equity market volatility has surged in the past six weeks, indicating that investors are nervous.
