MacroscopeA ‘phase one’ US-China trade deal will do little to bolster confidence shattered by deglobalisation

US Commerce Secretary Wilbur Ross recently suggested that an initial trade deal will go a long way towards resolving global uncertainty. To the contrary, it will take much more to reverse the effects of deglobalisation accelerated by the Trump administration

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US Commerce Secretary Wilbur Ross arrives at a state dinner at the Great Hall of the People in Beijing on November 9, 2017. Photo: Reuters

Published: 3:00am, 11 Nov 2019Updated: 3:07am, 11 Nov 2019

I asked US Commerce Secretary Wilbur Ross during a telebriefing from Bangkok last week how long it might take for international business confidence and investment to recover from US President Donald Trump’s trade wars even after a “phase one” settlement is reached between the US and China. His response was simplistic and over-optimistic.

“I’m reasonably optimistic,” he said. “We will at least get phase one together, and that will go a long way toward resolving the uncertainty. People were worried this trade spat might go on for years and create uncertainty. If we resolve phase one, that will calm people down because they’ll see that the endpoint is within sight.”

What world does Team Trump inhabit where they can’t see that the consequences of trade wars which they started are only just beginning to emerge, rather than fading? Don’t they know that international trade is imploding and that the globalisation on which post-war prosperity has been built is being reversed?

From the falling imports reported by the Institute of International Finance to the “synchronised economic slowdown” noted by the International Monetary Fund and the United Nations Conference of Trade and Development’s warning that a “lose-lose” trade war is compromising the stability of the global economy and future growth, the message is clear.

So why do Ross and other Trump administration members continue to mouth meaningless platitudes about confidence bouncing back after an initial deal? Only the absurdly euphoric New York Stock Exchange, which is on a trade-deal high – a classic blow-off before collapse – should be irresponsible enough to believe that.