Growth is still on a moderating track but some of the recent stress points are likely to continue to diminish. Moreover, the effects of some of those that remain are likely to be felt over much longer time frames than markets have priced.
"Popular commentary is over-playing the short-term impact of trade wars”
So in sum, global growth may be moderating but it is resilient. The slowdown from the 4.0 per cent peak seen in 2017 and 2018 is likely to continue into 2020 with growth of 3.7 per cent. Major economies such as China and the US are likely to be the major factors but India and Europe are also likely to slow.
Among the smaller economies, Australia and New Zealand are likely to be part of the samet trend, while some Asian economies have already recorded slower growth - and hence are less vulnerable.
Chief among the factors on which a longer perspective is required is the short-term impact of trade wars. Our judgement is popular commentary is over-playing trade wars, even if de-integration among some of the world’s major economies is likely to be a secular trend.
True, the US has imposed tariffs on $US250 billion (in annual terms) of Chinese exports but China exports a total of $US2.5 trillion each year. So even if some slowdown in Chinese export growth is expected, it just doesn’t seem probable that US tariffs on China are going to substantially weaken Chinese exports at an aggregate level.
In fact, economies not directly involved in the trade dispute to any meaningful degree, such as South Korea and Taiwan, saw export growth slow from 2017’s circa-20 per cent peak to mid-single digit rates in the first half of 2018.
Periods of substantially negative Asian export growth are rare and typically reflect major global economic dislocations.