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World Trade Does A U-Turn

 

Macro Commentary

Perhaps the market sentiment that global trade was going to come to a halt was a bit premature. Many feared that the US would withdraw from all trade arrangements with its major trading partners. Granted there was no shortage of political rhetoric, to put it kindly, to support those fears. This week, however, the White House announced that there is not a desire to withdraw from NAFTA “at this time.”  After pointed comments directed at Mexico, this about face is not the first policy direction to reverse course on the path from campaign to governance and likely not the last. All along, the consistent message from the Administration has been about finding a better deal in their view. In his book “The Art of the Deal” written thirty years ago, the now President stated clearly that his approach entails asking for a lot and being happy with most, working as many deals from different angles as possible since they don’t all work out, and embracing the publicity from being outlandish in media. The playbook is clearly still in place.

Meanwhile the rest of the world economy is looking up. The fourth quarter deficit in the Eurozone was 1.4% in aggregate across all 19 countries. That’s the lowest since the first quarter of 2008. The European Central Bank met this week taking no action and sent a more dovish message than anticipated in support of further recovery. In Asia, the Bank of Japan raised their 2017 GDP growth expectation to 1.6% during their meeting this week and industrial profits in China were up over 23% year-over-year in March after a difficult prior reading. All together the world economy looks on better footing.

 

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