China’s Coronavirus Is The New Trade War

According to analysts and economists who watch these things, Germany’s IFO Business Climate Index was expected to continue its rise. Having purportedly bottomed out back in September, like other sentiment indicators this one had been on the rebound, too, if, though, much less than those others (especially the “stimulus” loving ZEW). While maybe not suggesting the turnaround we had been told to expect over the last few months of 2019, 2020 was going to open by still going in the right direction.

Instead, the IFO stumbles out of the gate. At 95.9 for January 2020, that’s less than the 96.1 put up in December and well behind the 97.3 which had been forecast.

And the only thing anyone wants to know right now is what this has to do with China’s coronavirus outbreak.

A legitimate answer is, not much if anything. Perhaps Germany’s business professionals being surveyed by the IFO are beginning to worry over the disease’s spread in China, and given how closely China’s economic fortunes seem to be linked with Germany’s they’ve grown concerned about the second order spillover effects. Economic contagion, not directly the actual pandemic.

The New York Times writes today that the coronavirus outbreak has “revived” global economic fears. In one sense that’s true, but not quite in that way. Those concerns about the worldwide downturn never really faded away; you were just told (over and over) that they had. The media’s appreciation for them is what may have been revived.

The United States and China had achieved a tenuous pause in a trade war that had damaged both sides. The specter of open hostilities between the United States and Iran had reverted to stalemate. Though Europe remained stagnant, Germany — the continent’s largest economy — had escaped the threat of recession.

Now, the world is worrying anew.

In that sense, the coronavirus is, in this context, the new trade war. The mainstream needs to blame something and given how convenient the timing between “protectionism” and the “unexpected” appearance of this globally synchronized downturn should the latter flame back up again, having never really been extinguished, China easily provides the next scapegoat (wouldn’t it be ironic if the virus was found to have jumped from goats to humans?)

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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