Look to the markets for signs of brewing trade war

Look to the markets for signs of brewing trade war
Look to the markets for signs of brewing trade war

US protectionism has caused the Dow Jones index to dip almost 10% since its January high

It was only six months ago that US politicians were cheering the stock markets as an indicator of economic success. Those cheers have since disappeared and anyone wondering “why?” need only look to the Dow Jones Industrial Average.

The DJIA reached an all-time high on January 26 of 26,616.71, which was the same week US President Donald Trump announced his first round of tariffs, which targeted aluminium and steel. Since then the tit-for-tat exchange of tariffs have reach hundreds of billions of dollars. The Dow is now down almost 9.5 per cent since January’s high watermark, with each major drop coinciding with a Trump tweet announcing new tariffs. What a difference six months makes. In 2017, analysts were predicting that the bull run that started in 2009 might surpass the 13-year run of the 80s and 90s. It didn’t have to stop, either.

A number of indicators show the global economy in the second quarter was doing well. The S&P 500, often considered a better benchmark of the US economy than the DJIA, is still up marginally (45 points for the second quarter) thanks to solid company results and a booming tech sector. The tragedy here is the global economy was finally returning to a state of healthy growth, a full 12 years after the start of the global financial meltdown. If not for the rise in protectionist tariffs from the country that arguably needs it least, we would have been in the middle of a booming economy.

The world doesn’t have to give up hopes of that yet, but it will require the US to sit down with China, the EU, Mexico and Canada and work this out.

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