By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager, CI Multi-Asset Management
At the beginning of the year, an escalating trade war between the U.S. and China was noted as a risk to our outlook, which was that global economic growth is likely to remain positive in 2019, albeit at a much slower pace. Although we were initially pleased with the positive tone surrounding U.S.-China trade talks in the first quarter of the year, discussions have taken a turn for the worse in the past month. There’s large debate about who “wins” in such a dispute, but the reality is that both sides lose. Tariffs, like other taxes, are inherently growth-sapping and potentially inflation-boosting. Arguably, the U.S. has less to lose, with shipments to China coming in at less than 1% of U.S. gross domestic product. However, the U.S. imports more than 20% of its goods from China, leaving the consumer, the engine of the U.S. economy, worse off. Not to mention the impacts on business confidence and profit margins.
