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  • Donald Trump is somehow overseeing or threatening to conduct trade wars on three continents. The US China Trade War we have discussed in previous missives as investors focus on December 15th where the application of new tariffs on Chinese goods is a possibility. The Trump administration have threatened placing tariffs on French goods in retaliation to their proposed Tech Tax which is perceived as being unduly penal on US companies. And finally, Trump imposed steel and aluminum tariffs on Brazil and Argentina, seemingly because both counties have manipulated their currencies (although it is more likely that both countries are being reprimanded because they are replacing US famers as the primary suppliers of Soy to China. Three general points should be made with regards these latest developments. First, the imposition of tariffs is one of the few executive powers that can be conducted by the President without congressional support and this sort of “noise” may continue to play out in 2020. Secondly, there seems to be a gross fundamental misunderstanding within the Trump government as to the economic consequences of tariffs and the real sources of the US Trade Deficit. And thirdly, there is no evidence of an exit strategy from the Trump administration as these new tariffs becoming a headwind to US and Global growth in 2020.
  • Employment data released from the US highlight a healthy labour market. Whilst it is a lagging indicator it does offer some solace, when coupled with a Federal Reserve who wish to keep short term rates on hold, that the consumer could possibly play an important role in accelerating growth.
  • The Chinese private sector manufacturing PMI (see chart) showed improvement even with the Trade War with the US remaining unresolved. A revision of the 2018 GDP figure assists the authorities in their 10 year growth target. However, the quality of growth rather than the quantity should remain at the forefront of local and national authorities.