Trade War Tipping Points are Close

I don't have all of the metrics in my head however a there are a several known knowns.

On the issue of political games Trump believes he can light fires all over the place then put them out to present himself as a hero to his bargain basement, survivalist, fast food addicted and KKK styled voter base. This strategy works well most of the time because Trump's support base isn't smart. By contrast, the latest trade war escalation needs to be reversed quickly if it is to be at all reversable. As with climate change there are tipping points after which no amount of policy will do any good.

Very roughly, a 10% drop in the US stock market results in a direct 1% reduction in US GDP however this equation may not take into account rebounds (inter-correlations) from other markets that may multiply the impact into what economists call a vicious cycle or something to that effect.

The impact of the trade war on the EU and the China Region is also be significant thus lowering consumer demand for everything in those markets as well. That drop in global demand will impact demand for US goods and services in due course.

We will feel more of the impact on Australasian markets today and I very much doubt that emerging markets or EU Banks are in any condition to withstand this sort of wobbling. Given global conditions it may only take one sovereign default to cause a Lehman's moment IMHO and from there on end any form of policy reversal won't work.

OK. China has now devalued the Yuan against the USD. Xi may regret this stupid decision in due course but in any case lets now add currency instability and an exchange rate race to the bottom to our list of woes.

The market is placing (the always winning ) Trump on notice.

Trump will have to play hero to his voting base by the end of next weekor a tipping point for going over an economic waterfall may passed by, We can but wait and see.

cheers