The business outlook has dimmed because companies are no longer sure where and with whom they can invest and expand without incurring the ire of the U.S. President, and it is affecting companies in America as well as in the rest of the world.
U.S. President Donald Trump attends the first working session of the G7 Summit on August 25, 2019 in Biarritz, France. High on the agenda will be the U.S.-China trade warRecessions in the U.S. are typically caused by monetary tightening, financial crises stemming from asset bubbles or external shocks. In spite of the U.S. Federal Reserve’s U-turn on interest rate normalization, all three are casting darkening shadows over the American economy.in a report released this summer that the U.S.
By weaponizing both trade and currency, President Trump has infected the global economy with deep uncertainty. In imposing sanctions and tariffs—as well as banning American firms from doing business with a growing list of foreign companies on grounds of national security—Trump has enfeebled world trade, turning it into a brake on global growth.
Trump is also weaponizing the U.S. dollar, instructing the U.S. Treasury to put more countries under surveillance for suspected “currency manipulation,” subjecting them to potential retaliatory sanctions. No surprise that China has beenafter the yuan’s recent depreciation; but the list also includes many of America’s closest allies in Asia and Europe. Furthermore, Trump has also changed the rules to make it easier to label a country a currency manipulator.
A potentially more significant recession signal is the decline in corporate profit. Historically there is a tighter fit between the two, according to a research note by CLSA. Corporate profit in the U.S. contracted consecutively in the first two quarters this year. Among S&P 500 companies profit fell 0.3% in the first quarter, then deepened to a decline of 2.8% in the second quarter, according to Bloomberg. Small cap companies, which are some of the most indebted businesses in the U.S.
Federal Reserve Chairman Jerome Powell testifies before the House Financial Services Committee on Capitol Hill in Washington on July 10, 2019.I am the Chief Economics Commentator at Forbes Asia, and a Visiting Scholar at the Lee Kuan Yew School of Public Policy, National University of Singapore. I was the Glob...
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