Fear of Prolonged U.S.-China Trade War Rattles Markets
Some financial analysts warned that if trade talks between the countries collapse—and tariffs remain high—the global economy could move toward recession.
Here is today’s Foreign Policy brief: The ongoing U.S.-China trade dispute weighs on markets, President Nicolás Maduro calls for legislative elections in Venezuela, and Austrian Chancellor Sebastian Kurz distances himself from the far-right.
We welcome your feedback at firstname.lastname@example.org.
Protracted Trade War Rattles Markets
Fears of a protracted trade dispute between the United States and China hit financial markets on Monday. Worries that the trade war will last longer have weighed on technology companies in particular. Apple shares fell by 3.3 percent amid a warning that retaliatory tariffs will drive up prices. As expected, shares of companies supplying the Chinese firm Huawei, which the United States blacklisted last week, also fell.
For its part, the U.S. Federal Reserve said Monday that the dispute “would have to go on for some time” to significantly damage the U.S. economy. But some financial analysts warned that if trade talks between the countries collapse—and tariffs remain high—the global economy could move toward recession.
Beyond trade. The provocations aren’t limited to the economy. The U.S. military said one of its warships had passed through a disputed area in the South China Sea, angering China. And at the U.N. health assembly on Monday, the United States supported calls for Taiwan—blocked by China in recent years—to get a seat at the table.
A return to trade talks? No new talks have been planned since negotiations broke down earlier this month, and the rhetoric from both the United States and China has certainly soured. A harsh tone from Beijing suggests that it might not be ready to return to the negotiating table anytime soon. China’s Foreign Ministry spokesman said Monday the United States had “extravagant expectations.”
Then what? The United States might not let up. Expect more tariffs and perhaps a full-scale decoupling of the two economies, Matt Peterson writes in the Atlantic. “What happens when tariffs don’t do the trick? It’s hard to say. If the [U.S.] administration has a Plan B for a new trade strategy—one in which the tariffs go away without Chinese action—it won’t say so,” he writes.
What We’re Following Today
Maduro proposes legislative elections. On Monday, Venezuelan President Nicolás Maduro proposed early elections for the country’s National Assembly, currently led by his challenger, Juan Guaidó. The next elections are currently scheduled for 2020. Meanwhile, Guaidó’s envoy to the United States met with officials in Washington on Thursday to discuss the country’s crisis. U.S. President Donald Trump has not ruled out a military option.
Kurz tries to ditch the far-right. Austrian Chancellor Sebastian Kurz is looking to stay in power by distancing himself from the country’s far-right Freedom Party amid scandal. On Monday he recommended sacking the interior minister, Herbert Kickl, a member of the Freedom Party. After Kickl got the boot, other ministers from the party resigned. Kurz’s poll numbers have improved since he ended his coalition with the far-right, but they don’t indicate his party could win an outright majority in snap elections.
Aid may be suspended in Houthi-held Yemen. The World Food Program may halt aid to Houthi-held areas in Yemen, citing violence and insecurity for humanitarian workers. The WFP’s announcement comes after a failed withdrawal of Houthi forces from Hodeidah. Houthi fighters and pro-government forces have been fighting around the strategic port since last week.
Mexico wants development plan for Central America. Mexican President Andrés Manuel López Obrador wants the United States to ditch funds earmarked for security in Mexico in favor of a development assistance plan for Central America to slow migration. Last week, U.S. Attorney General William Barr rolled back some U.S. aid cuts to the region.
Keep an Eye On
Zelensky in office. Ukraine’s new president, the former comedian Volodymyr Zelensky, took office on Monday and immediately dissolved the country’s parliament, largely dominated by allies of defeated ex-President Petro Poroshenko. A snap election will take place within two months, and the country’s prime minister has resigned in order to run again.
Brazil’s economy. Brazil’s government lacks the votes it needs to push a pension reform bill through Congress that could pave the way for major fiscal reforms, and lawmakers have traded barbs with President Jair Bolsonaro over the issue. Economists are now projecting a third year of meager growth in the country, which is still recovering from its worst-ever recession.
Drought in North Korea. On Monday South Korea pledged $8 million in food and medical aid to North Korea, which says it is experiencing its worst drought in decades. South Korea hopes to court broader support for sending aid—directed at children and pregnant women—either directly or via the World Food Program.
Britain’s new espionage law. Britain is working on a new spying law and considering updates to its laws on treason in the wake of last year’s nerve agent attacks in Salisbury, for which Britain blamed Russia. The changes are intended to address threats from hostile states.
Feminist foreign policy. France has joined Sweden and Canada in committing to a feminist foreign policy—an area that remains relatively undefined, Lyric Thompson argues in FP. The focus on feminism creates a tension with current U.S. policy, which has increasingly restricted women’s access to abortion and reproductive health care.
Odds and Ends
The series finale of Game of Thrones hasn’t aired yet in China, and some disappointed fans are blaming the ongoing trade war with the United States. The company that streams it, Tencent, hasn’t provided further detail—or a release date.
Thousands in Estonia have already cast their votes for the European Parliament elections: It’s the only country in the world where the entire electorate can vote online.
In 2018 Germany spent a record 23 billion euros ($25.7 billion) on refugee programs and efforts to combat the root causes of migration abroad, an 11 percent increase over the previous year. Chancellor Angela Merkel has defended her decision to keep German borders open amid the migrant crisis in 2015, but pledged to fight the causes of migration in refugees’ home countries. More than one-third of last year’s funds was spent on projects abroad. Merkel will discuss the budget for refugees and integration with her cabinet on Wednesday.
Foreign Policy Recommends
In an excoriating New York Times book review, Anand Giridharadas calls into question the genre of 30,000-foot books, “which sell an explanation of everything.” He eviscerates one book in particular: Jared Diamond’s Upheaval: Turning Points for Nations in Crisis. Giridharadas relentlessly fact-checks Diamond and takes him to task for forcing complex issues into an inelegant, monolithic framework of his own invention. He doesn’t buy into Diamond’s sweeping generalizations and calls him out for the white male pundit habit of quoting one’s friends rather than relying on evidence. Rarely does the New York Times take down a book so vociferously. Giridharadas pulls off the task with aplomb and in doing so makes a powerful case for writing “from the soil up, not the sky down.” Benjamin Soloway, associate editor
That’s it for today.