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The trade war could be the beginning of a global economic crisis
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Loading...George Yeo, former trade and foreign minister of Singapore, says that if the conflict between China and the U.S. escalates, it could push the entire world into an economic crisis. The risk of this development is especially significant given Trump's threats to leave the WTO if changes are not implemented. In addition, it seems that Trump will go ahead with imposing tariffs on $200 billion of Chinese imports.
Although for Yeo this scenario represents a tail-risk, it is significant that business are becoming more wary of making investments, especially in foreign countries. This wariness is especially significant in view of Argentinian rates reaching 45% this week.
According to Yeo there is a chance of a compromise between the U.S. and China but given Trump's character, this will likely be possible only if the Chinese administration and President Xi are willing to give serious concessions to the U.S.
According to most investors and analysts, the worst for Asian stocks is over. We expect support for Chinese shares in the following months, because next week MSCI will add more Chinese stocks to its indices. This means additional support for Chinese stocks and markets next week.
Monday will be an important day for determining sentiment and risk appetite towards Asia. The chart on the left shows the effect of July's inclusion of Chinese shares in the MSCI indices.
Source: Bloomberg Finance L.P., CNBC
Original post: Trade tensions could spark a 'global economic crisis,' says former trade minister
Chart: Bloomberg Finance L.P.
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