This is an OZY Special Briefing, an extension of the Presidential Daily Brief. The Special Briefing tells you what you need to know about an important issue, individual or story that is making news. Each one serves up an interesting selection of facts, opinions, images and videos in order to catch you up and vault you ahead.
WHAT TO KNOW
What happened? As world leaders congregate in Buenos Aires, Argentina, for their two-day G-20 summit, they have plenty to discuss. They’ll focus on Ukraine’s ongoing conflict with Russia, the U.K.’s impending split from the EU, and international outcry over the murder of dissident Saudi journalist Jamal Khashoggi. But let’s not forget the global economy: The summit’s taking place at a time when the U.S. economy appears to be chugging along smoothly, while many others, from Europe to China, aren’t doing quite as well. The full-blown trade war between Beijing and Washington is of utmost concern.
Why does it matter? In the era of globalization, the consensus (even among rivals) has always been that ripple effects from economic turmoil in one major economy would eventually reach others. In other words, everyone was invested in everyone else’s success. While that’s still the case, it raises a new question: Will the American retreat from multilateralism under the Trump administration’s “America First” approach — here’s looking at you, punitive trade policies — spark global economic chaos just for the sake of keeping the U.S. economy humming?
HOW TO THINK ABOUT IT
Everyone’s feeling it. Globally, it’s not a great time. With the U.K. leaving the European Union, few observers — including the British government, which predicts an economic contraction of at least 3.9 percent after Brexit — expect cheerful economic times. Meanwhile, Germany posted its first loss in three years, about 0.2 percent of GDP in mid-2018, while the eurozone’s growth rate of around 0.2 percent was the slowest since 2014. Japan’s economy shed 0.3 percent, and Chinese growth is at a decade-low. Meanwhile, experts have warned the robust growth of 2017 may not return. “Risks are beginning to materialize,” IMF chief Christine Lagarde recently said.
But the US is doing fine. Right? The dollar is strong, the economy’s growing at a 3.5-percent annual pace, and unemployment is under 4 percent. Meanwhile, the stock market recently rallied at indications from the Federal Reserve that an imminent rate hike is unlikely. Still, some forecasters are worried because economic recoveries never last forever — and there are signs the U.S. is already slowing down. Home and auto sales have peaked, analysts believe, and all it might take to throw the country into another recession is a combination of higher interest rates, rising inflation and sputtering corporate confidence. But if not, the current period of American economic growth could soon rival any since at least the Civil War.
Searching for stability. The current iteration of the G-20 took shape a decade ago amid global economic catastrophe. Back then, the West realized that a full recovery — read: the world economy’s future — hinged on fast-growing developing economies. But now the world’s more tuned in to what President Donald Trump will do (or say). Given his economic threats against Beijing, world leaders are undoubtedly hoping Trump and his Chinese counterpart, Xi Jinping, can holster their guns. Why? Because they know that whatever happens between these two powerhouses will have ripple effects that impact their countries too.
So who’s hurting who? Some analysts estimate the current $200 billion in tariffs on Chinese products could damage Beijing’s economy “very badly.” But U.S. firms in sectors as diverse as agriculture and automaking say they’re already taking hits too, citing increasing costs and other negative factors on their business. More broadly, if Trump and Xi fail to make headway at this year’s G-20, their ongoing trade war could disrupt global supply chains even further — spelling trouble for other major economies. “It got bigger than anyone thought it was going to get,” said one expert. Still, one potential bright spot emerged on Friday as the leaders of the U.S., Mexico and Canada inked a new trade pact replacing the North American Free Trade Agreement.
WHAT TO READ
Are We at “Peak America”? by Fareed Zakaria in the Washington Post
“While the United States continues to outperform other advanced economies, the ‘rise of the rest’ also continues, with China, the world’s second-largest economy, growing at three times the pace of the United States.”
Trump’s China Policy Is a Triumph, by Greg Autry in Foreign Policy
“The hard-line U.S. policy has been effective and should be maintained until China demonstrates real, substantial behavioral change such as no longer requiring forced joint partnerships and ceasing its vast state-run cyberespionage program.”
WHAT TO WATCH
Trade Face-Off: What Trump and Xi Want From Their G-20 Talks
“Don’t expect a trade agreement with all sorts of clauses and particulars. The very best, the most you’re going to get out of this is an agreement to talk further.”
Watch on the Wall Street Journal on YouTube:
Protests Continue in Argentina on Eve of G-20 Summit
Watch on Global News on YouTube:
WHAT TO SAY AT THE WATERCOOLER
Do tariffs ever work? When President Barack Obama imposed 35 percent tariffs on tires imported from China, economists estimated the U.S. tire industry saved a maximum of 1,200 jobs — though it came at a price of around $900,000 per job. And 21 months after enforcing tariffs of up to 30 percent on steel from Europe, Asia and South America in 2002, President George W. Bush withdrew them — but only after they cost some 200,000 American jobs.