The Trade Conflict Is Stifling Global Manufacturing

Around the world manufacturing is either slowing or contracting, adding to existing worries about Europe's debt crisis and the economic slowdown in Asia.

This is why the trade conflict is so serious and could contribute to another economic crisis.

Surveys of purchasing managers from China, Europe and the US all point to a downturn in manufacturing activity.

As well, the growing threat of trade protectionism and weaker capital investment trends has spread from the advanced economies to the emerging market economies as well. World trade, which is dominated by capital equipment and consumer durables, remains unusually sluggish as growth decelerates around the world.

Indeed, all of the advanced economies are exhibiting softer trade and investment trends. Some of the slowdown in employment growth and the souring in consumer confidence can also be directly traced to worries related to the trade conflicts.

Political leaders and business executives have been openly venting their concerns that the deteriorating trade environment was worsening the global economic slowdown.

The following chart, which was developed by the TD Bank, indicates that the manufacturing industries around the world are experiencing a synchronous slowing. In fact, manufacturing activity is slowing in the US and is contracting in China, and the Euro Area. The global PMI chart indicates that the problem has spread around the world.