Three words uttered in a throwaway moment sent markets into a tailspin last night, showing just how fragile the global economy has become — and how fraught the political environment is.
The sense of panic that: “It’s over. Yes” caused is a reminder that, with deep recessions caused by the Covid-19 pandemic, now is not the time to add another log to the economic bonfire.
The comments from Donald Trump’s hawkish trade adviser Peter Navarro — in response to a long question by a reporter on whether parts of the China-U.S. trade deal were “over” — necessitated the intervention of the U.S. president to hose things down.
“The China Trade Deal is fully intact. Hopefully they will continue to live up to the terms of the Agreement!” Trump said in a Twitter post. China said Navarro’s comments had no credibility.
The whipsaw from the trade remarks points to a larger challenge. Big global economic downturns, and resultant political problems at home for leaders, can create the temptation to point fingers, to pick fights. To fall into protectionism, to shut the door on skilled immigrants, to lift coronavirus aid programs too quickly for fear of the debt burden accumulating.
That’s particularly dangerous when it involves the two biggest powers. There could be political points for both Trump and President Xi Jinping in returning to a full-blown trade war, but economically everyone would stand to lose.
Hair-trigger markets are just one pointer to that.
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Immigration freeze | Trump signed an order temporarily halting access to several employment-based visas, affecting hundreds of thousands of people seeking to work in the U.S. The technology industry said the move would hurt the economy. The issuance of new green cards will also remain halted through the end of the year.
Setting the stage | Trump has repeatedly said vote-by-mail could cost him re-election. Some Republican strategists think he’s right, but, as Ryan Teague Beckwith reports, that’s more because the president’s words risk scaring away his own voters than because of fraud. Trump argues, without citing evidence, that mail-in balloting is open to manipulation, vulnerable to foreign forgeries and beneficial to Democratic rival Joe Biden.
- Trump is looking to put the setback of his poorly attended Oklahoma rally behind him with a visit to Arizona today, where he’ll return to the familiar issue of border security.
Waning confidence | Sweden’s decision to buck the trend with a much softer lockdown than its neighbors initially found widespread public support. No longer. Now home to one of the world’s highest Covid-19 death rates — and with some European nations leaving Sweden off travel lists — backing for Prime Minister Stefan Lofven has slumped 10% since April.
Next step | U.K. Prime Minister Boris Johnson may announce he’s halving the minimum “social distance” between people to one meter amid pressure from his own party to speed up the relaxing of virus restrictions as the economy faces its worst recession in 300 years. Pubs and restaurants will be able to reopen as soon as July 4, but many have warned they won’t be viable if forced to keep customers two meters apart.
Arms request | India is urging Russia to accelerate the delivery of a missile defense system following its worst military clash with China along their disputed border in four decades. The two sides have reportedly agreed to disengage in the area, while the Chinese and Indian foreign ministers are due to meet today amid rising nationalism as the countries jostle for regional influence.
What to Watch
- Singapore will hold an election on July 10 as Prime Minister Lee Hsien Loong seeks a renewed mandate amid the pandemic that has pummeled the economy.
- The U.S. has circulated a draft resolution among United Nations Security Council members to extend an arms embargo on Iran indefinitely, with the ban on weapons deals due to expire in October under the terms of the 2015 nuclear deal.
- The coronavirus is creating another problem for the world: contaminated medical waste, including masks, gloves and test kits made up largely of plastic.
And finally … While Portugal has contained the spread of Covid-19 better than some other European nations, notably neighboring Spain, new infections are springing up in shantytowns inhabited by families of mostly African descent on the outskirts of Lisbon. Henrique Almeida takes a closer look at the social disparities that have been thrust onto the political agenda in the era of coronavirus.
— With assistance by Karl Maier
The post Loose Words in an Economic Crisis Spark Turmoil appeared first on Bloomberg.