Trump calls an armistice on his trade war with China

In Asia Times, David Goldman writes,

It’s not over until it’s over, but President Donald Trump might have secured his re-election on Friday by calling an armistice in his trade war with China.

...The stock market is saying that the economy’s problem during the past year was the trade war, and that a resolution of trade will lead to faster economic growth.

The best-performing sectors in today’s market rally are the ones most sensitive to the overall condition of the world economy and world trade, starting with energy equipment, energy exploration and development, retail, mining and transportation. These are sectors that are exposed to the indirect effects of trade war with China.

...The biggest damage to the US economy from the tariff war was to throw investment indecisions into a miasma of uncertainty. Corporations in the US and overseas didn’t know where to locate supply chains and sat on their hands. As a result, investment fell, and became a net drag on GDP, offsetting an increase in consumer spending. The result was a sharp slowdown of growth as well as a manufacturing recession.

It will take some time to repair the damage to business decision-making arising from the trade war, but today’s stock market move shows how quickly expectations can turn around.

President Trump is on the right track, and future historians might cite today’s negotiations with China as a milestone on his way to a second term.

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