The World is Eyeing at G20 Summit Like It Has Never Been Before
The G20 is about to start, and everyone's attentions are all at the meeting between Trump and Xi. How the world economy will turn out for the rest of the year and the next as well is up to this trade talk.
How 2018 economy will end is now up to the talk between the US President Donald Trump and the Chinese President Xi Jinping at G20 summit. Technically, the forum actually being held on Friday, November 30, 2018, but any decisions may come later on the dinner talk between the two greatest world economy on Saturday. Everyone is waiting to hear the discussion regarding the trade talk more than the main agenda of G20.
The trade war and the rate hike by Fed have been tormenting the market since October. After a 4.3% bounce back this week in hope of positive outcome from G20 summit, the Dow is now up nearly 2.5% for the year. Especially on Wednesday that the index surged more than 617 points after Fed Chairman Jerome Powell said the fed funds rate was close to neutral, sending a signal that interest rates do not need to be raised much more. The S&P 500 closed on Thursday at 2,737 points, up 4% for the week and is now up 2.4% for the year.
If Trump agrees to hold off on increasing tariffs, now 10% on $200 billion of Chinese goods and agrees to hold off putting tariffs on a wider group of goods as talks proceed, the stock markets could be much better than it already is for the rest of the year. On the other hand, if the talk fails, we could see the crash just like in October happen again in December, and possibly even worse when the new 25% tariff kicks in next year.
At the moment, any hits to the two economies will spill over to the rest of the world as the U.S. and China together account for close to 40% of global gross domestic product. On October, the International Monetary Fund (IMF) had already downgraded its forecasts for global growth this year and next to 3.7% instead of earlier forecast at 3.9%, citing trade tensions as a major risk that will derail economic activity worldwide.
In the midst of all tension, at the economy conference in Hamburg, Germany, China’s Vice Premier Liu He may have secretly delivered a message to Trump saying that China would open its economy “even wider” to the outside world, “greatly improving” protection for intellectual property and proactively boosting its imports of overseas products. Which is something that the US have been wanting from China. In a speech in Hamburg that did not mention the US by name as he was addressing the matter to the European countries, but experts see that this may be a sign to build a tone for the upcoming G20 summit.