The big question in 2019 is where the US administration is heading on trade policy. After all, it is this presidency’s hostile approach to global trade that was behind much of the disappointment across economies and asset markets in 2018.
It was not inflation that derailed the expansion. The Federal Reserve has been slowly raising rates and the European Central Bank has just ended its policy of quantitative easing. While this may have reduced the scale of the monetary tailwind, the level of inflation-adjusted interest rates is still barely in positive territory in the US and remains deeply negative in Europe. It is hard to argue people are suddenly being tempted to save rather than spend.
The responsibility for the downturn lies at the doors of the White House. A 10 per cent tariff is now being applied to $250bn of US imports from China, with the risk that this rises to 25 per cent in March if Beijing and Washington cannot turn their temporary trade truce into something permanent. Chinese new export orders are tumbling. The business surveys in Europe are just as bad. No wonder that companies, gripped by uncertainty, are once again deferring investment.