[June30，2018]

Theworldthisweek
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Letters
Briefing
UnitedStates
TheAmericas
Asia
China
MiddleEastandAfrica
Europe
Britain
International
Specialreport
Business
Financeandeconomics
Scienceandtechnology
Booksandarts
Obituary
Economicandfinancialindicators


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Theworldthisweek
Politicsthisweek
Businessthisweek
KAL’scartoon

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Politicsthisweek

Jun21st2018
DonaldTrumpsignedanexecutiveorderallowingthechildrenofillegal
immigrantstostaywiththeirparentsindetentioncentresifcaughtcrossingthe
Mexicanborder.Previously,undertheWhiteHouse’s“zero-tolerance”policyfor
illicitborder-crossing,therehadbeenasharpriseinfamiliesbeingforciblysplit
up.Picturesoftearfulchildrentornfromtheirparentsprovokedanoutcry,
thoughapollfoundthatasmallmajorityofRepublicanssupportedthepolicy.
AmnestyInternationalsaidofficialshadintentionallyinflicted“severemental
suffering”onthemigrants.Seearticle.
ThedirectoroftheFBI,ChristopherWray,saidhisagencywouldnotrepeatthe
mistakesuncoveredinareportbytheJusticeDepartment’sinternalwatchdog,
whichcriticisedthehandlingofinvestigationsintoHillaryClintonandDonald
Trumpduringtheelectionin2016.Amongotherthings,itfoundthatJames
Comey,thentheFBIchief,hadbrokenpolicybymakingtheinvestigationinto
MrsClinton’se-mailserverpublic,butthathehadnotactedwithpoliticalbias.
PaulManafort,MrTrump’sformercampaignmanager,wassenttojailbya
judgeafterheallegedlytriedtoswaythetestimonyoftwowitnessesathis

forthcomingtrailonarangeofcharges,whichincludemoney-laundering.He
hadbeenonbailaheadofthetrial.


AmericawithdrewfromtheUNHumanRightsCouncil,abodythatincludes
China,Cuba,theDemocraticRepublicofCongoandotherparagonsofvirtue.
NikkiHaley,America’sambassadortotheUN,saidthebodyprotectedabusers
ofhumanrightsandwasa“cesspoolofpoliticalbias”,especiallyagainstIsrael.
Thecouncil’ssupportersretortthatthecouncildoessomegood,andthatif
democraciessuchasAmericapulloutitwillprobablydoless.Seearticle.
Ifatfirstyoudon’tsucceed
NewtalkswereheldtotrytoendSouthSudan’sfive-yearcivilwar.Itisthe
firsttimethetwokeyleadersintheconflicthavemetintwoyears.Allprevious
attemptstobrokerapeacedealhavefailed.
Israelijetsstruck25targetsinGazalinkedtoHamas.Thestrikeswerein
responsetoalmost50projectilesfiredatIsrael,saidtheIsraelimilitary.See
article.
TheUNsaidthatwarcrimeswerecommittedbyforcesloyaltotheregimeof
Basharal-AssadintheEasternGhoutaregionofSyria.TheUNisstill
investigatingwhetherchemicalweaponswereusedinanattackonrebelsin
Douma.
TheWorldHealthOrganisationsaidthattheEbolaoutbreakintheDemocratic
RepublicofCongohaslargelybeencontained,butofficialswarnedagainst
complacency.
HelloDuque


IvánDuque,aconservativewhoopposespartsofthepeaceagreementbetween
Colombia’sgovernmentandtheFARCguerrillagroup,wonthecountry’s
presidentialelection.Hetook54%ofthevoteinarun-off,defeatingGustavo

Petro,afar-leftformermayorofBogotá.Seearticle.
Masaya,atownnearManagua,Nicaragua’scapital,declaredthatitnolonger
recognisesthepresidencyofDanielOrtegaandwillgovernitself.Atleastthree
peoplewerekilledinanoperationtoregaincontrolofthetown.Morethan170
peoplehavediedinprotestssinceApril.MediatorsfromtheCatholicchurch
suspendednegotiationsbetweenthegovernmentandtheoppositionbecausethe
governmentrefusedtoallowforeignhuman-rightsobserversintothecountry.
Canada’sparliamentvotedtolegalisetherecreationaluseofcannabis.Thelaw
regulatesitscultivation,setslimitsonpossessionandprohibitsmarketingthat
wouldencourageconsumption.WhenittakeseffectinOctober,Canadawillbe
thesecondcountryintheworld,afterUruguay,tomakeitlegaltopuff
marijuanaforpleasure.
Europe’scriticalpoint
ApoliticalcrisisrockedGermany.ThealliancebetweenAngelaMerkel’s
ChristianDemocratsanditsmoreconservativeBavariansisterparty,theCSU,
lookedasifitmightbreakdownoverhowtohandlemigrants.MrsMerkel
seemstohavewontwomoreweekstosolvetheproblem.Seearticle.


Italy’sinteriorminister,MatteoSalvini,calledforacensusofRoma.He
threatenedtodeportRomawhoarenotItaliancitizens,butsaidthat
“unfortunately”thoseRomawhowereItalianwouldbeallowedtostay.See
article.
TheHungarianparliamentpassedalawthatwouldsendanyonewhohelps
illegalimmigrants,includinglawyerswhoassistasylum-seekers,toprisonfora
year.Thenationalistgovernmentcallsmigrantsasecuritythreat.Thereare
hardlyanyoftheminHungary,butmanypassedthroughontheirwayto
Germanyin2015.
TheBritishgovernmentfendedoffanotherattemptbyRemainerstoensurethat
MPshavethefinaldecisionshouldtheBrexittalksendwithnodeal.The

governmentwonavoteinParliamentby319to303votesaftergivingfurther
assurancesthatMPswouldhavea“meaningfulvote”.OneToryRemainersaid
thatmeanta“realsay”.BrexiteerssaidnothinghadchangedandMPswouldget
nosay.Seearticle.
Mountingtrouble
India’srulingHindu-nationalistBharatiyaJanataPartypulledoutofanalliance
withthePeople’sDemocraticPartyinKashmir,promptingthestategovernment
tocollapse.Kashmir’sgovernor,whoisappointedbytheBJP-ledcentral
government,willassumecontrolofthestate.Separately,unknownattackers
murderedShujaatBukhari,oneofKashmir’smostrespectedjournalists.
NewZealand’sprimeminister,JacindaArdern,hasgivenbirthtoherfirstchild,
ababygirl.Shewillnowtakesixweeksofmaternityleave,duringwhichher
dutieswillbeperformedbythedeputyprimeminister.Sheisonlythesecond
electedleaderinmodernhistorytogivebirthinoffice.ThefirstwasBenazir
Bhutto,aprimeministerofPakistan,in1990.


KimJongUn’smakeovercontinuedwithatwo-dayvisittoChina,wherethe
NorthKoreandictatorwashailedasaleadertryingtodevelophisimpoverished
nation.MrKim,whokeepsbabiesinprisoncampsandhashadmembersofhis
ownfamilykilled,attendedabanquethostedbyXiJinping,China’spresident.
ThepairdiscussedMrKim’srecentsummitwithDonaldTrump,whichwasheld
inSingapore.
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Businessthisweek

Jun21st2018
Theprospectofanall-outtradewarbetweenAmericaandChinabecamereal.
DonaldTrumpsaidhewouldimposetariffson$50bnofChinesegoods,because
BeijingwasnotdealingwithAmericancomplaintsaboutstealingintellectual
property.Chinarespondedinkindbyannouncingpenaltieson$50bnof
Americangoods,whichpromptedMrTrumptothreatentolevyadditionaltariffs
ongoodsworth$400bn.Seearticle.
Takingthewarseriously
Globalstockmarketstookfrightatthetradenews,nonemoresothaninChina.
TheShanghaiCompositefellby4%inadaytoitslowestlevelin20months.
TheShenzhenCompositedroppedby6%.YiGang,thegovernorofthePeople’s
BankofChina,saidinvestorsshould“staycalmandrational”.Thecentralbank
pumped200bnyuan($31bn)intofinancialinstitutions,followedbyasmaller
intervention,toensuretheyremainliquid.Seearticle.
OilpricesswungupanddowninpartbecauseofChina’splantotargettariffsat
Americanenergysupplies.InvestorswerealsojitteryaheadofanOPEC
meetingonJune22ndtodiscusswhethertoincreaseoilproductionafteran18monthfreezeinoutput.
Germany’scentralbankcutitsforecastofthecountry’seconomicgrowthrate
thisyearto2%,from2.5%.TheBundesbankthinksthe“externalenvironment”
isdrivingupuncertaintyintheGermaneconomy.
MarioDraghihintedthattheEuropeanCentralBankcouldrestartitsbondbuyingprogrammeifeconomicconditionsdeteriorate,justdaysafterthebank
announcedthatitwouldphaseoutitspurchasingofassets.TheECB’spresident
emphasisedthatinterestrateswouldremainultra-lowuntilatleastSeptember
2019.TheECBistohalvetheamountofassetsitbuyseachmonthto€15bn
($17bn)fromthisSeptemberandwillendallpurchasesinDecember.
MSCI,acompanythatdesignsstockmarketindices,saidthatArgentinawould
returntoitsemerging-marketindexin2019afteranabsenceoftenyears.That


shouldlowerthecountry’sborrowingcostsandincreaseinvestmentinitsstock

andbondmarkets,aboostforArgentina,whichisbattlingarunonthepesoand
hashadtoturntotheIMFforhelp.SaudiArabiawillalsobeaddedtotheMSCI
emerging-marketindexforthefirsttime.
ChasingtheFox
Disneyraiseditsbidforthebulkof21stCenturyFox’sassetsto$71bn,almost
halfofwhichisincashandtherestinshares.Thattopsanunsolicitedrivalallcashofferof$65bnfromComcast.
TheWhiteHouseannouncedthatKathyKraningerwouldbenominatedtohead
theConsumerFinancialProtectionBureau,abugbearforRepublicansever
sinceitscreationaspartoftheDodd-Frankreforms.Theagencyisbeingledby
MickMulvaney,whoisalsotheheadoftheWhiteHousebudgetoffice,where
MsKraningercurrentlyworks.Some(mostlyDemocrats)questionedMs
Kraninger’sappointment,claimingthat—asaWhiteHouseinsider—shelacks
theexperiencetorunanindependentoffice.
TheflowofEuropeanventurecapitalhititshighestlevelforadecadelastyear,
accordingtoInvestEurope,atradeassociationfortheindustry.Ofthe€6.4bn
($7.2bn)ininvestments,45%wenttoinformationandcommunicationsstartups
and23%tobiotechandhealthcare.
InthebiggestbankingmergerinBritaininadecade,CYBG,theownerof
ClydesdaleandYorkshirebanks,agreedtopay£1.7bn($2.3bn)forVirgin
Money.ThedealcreatesBritain’ssixth-largestbank.
FordandVolkswagensaidthattheyweretalkingabouta“strategicalliance”
whichcouldseethemdevelopcommercialvehiclestogether.Fordalsounveiled
planstocreateahubforelectricandautonomouscars,technologieswhereithas
laggedbehinditsrivals.
RupertStadler,thechiefexecutiveofAudi,Volkswagen’sluxurybrand,was
senttojailinGermanywhileajudgelookedintoallegationsthathemighttryto
interferewithaninvestigationintoVW’semissionscheating.Heisthemost
seniorexecutiveattheVWgrouptohavebeenarrestedoverthescandal.
Downandout



GeneralElectricwasbootedoutoftheDowJonesIndustrialAverage.The
companyhadbeenontheindexof30sharepricescontinuouslysince1907and
wasoneofitsoriginalcomponentsin1896.ItisreplacedbyWalgreensBoots,a
pharmacychain.GEwasthemostvaluableAmericancompanyin2000,butits
sharepricehashalvedoverthepastyearowingtoadifficultrestructuring
process.
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KAL’scartoon

Jun21st2018
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Leaders
AndrésManuelLópezObrador:Mexico’sanswertoDonald
Trump
Turkey:Timetogo
Theworldeconomy:Don’tcrashit
Immigration:Separationanxiety
Urbantransport:Offtherails
ReforminSaudiArabia:TheSaudirevolutionbegins

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AndrésManuelLópezObrador

AMLO,Mexico’sanswertoDonaldTrump
HowscaredshouldtheworldbeofMexico’slikelynextpresident?

Jun23rd2018
THESEdaysMexicansagreeontwothings.Theirfootballteam’svictoryover
GermanyonJune17thwasmagnificent.AndtheelectionsonJuly1stwillbethe
mostimportantindecades.Thefront-runnerforthepresidency,AndrésManuel
LópezObrador,leadsacoalitioncalled“Juntosharemoshistoria”(“Togetherwe
willmakehistory”).Hisopponentsfearthathewillachievejustthat,inabad

way.
MrLópezObrador,whohasrunforthepresidencytwicebefore,hasafolksyair
ofincorruptibilitythatenchantsmanyMexicans.Hepromisesa“radical
revolution”.Somehearthatasathreat.MrLópezObradorhasattimesopposed
themeasuresearliergovernmentshavetakentomodernisetheeconomy.His
criticslikenhimtoHugoChávez,whose“Bolivarianrevolution”hasbrought
ruintoVenezuela.ThenationalistpopulismheoffersisunlikeanythingMexico
hasseensincetheearly1980s.Andifthepollsareright,hewillwin.
Withthat,LatinAmerica’ssecond-biggestcountrywilljoinaclutchof
democracieswhereelectorateshaverebelledagainsttheestablishedorder.What


isabouttohappeninMexicofeelsakintotheelectionofDonaldTrumpin
America,Britain’svotetoleavetheEuropeanUnionandItaly’sturntowards
populism.ItmayberepeatedinBrazil,wherethefront-runnertowinthe
presidencyinOctoberisJairBolsonaro,whospeaksviciouslyaboutgaypeople
butwarmlyofmilitaryrule.
Thecausesofpopularangervary.InLatinAmerica,aselsewhere,votersare
furiousatelitestheyregardascorrupt,ineffectualandcondescending.Justas
Americanpopulistsdecrythe“swamp”inWashingtonandBraziliansareaghast
atthefilthoftheirpoliticalclass,MrLópezObradorfulminatesagainstthe
“mafiaofpower”thatheclaimscontrolsMexico.
Aleapintotheunknown
Thecharismaticleaderswhoridetheseresentmentstopowerarealmostalways
falseprophets,promisingsecurityandprosperityevenastheyerodetheir
foundations.Thedangertheyposetonewdemocraciesisgreaterthaninmore
deeplyrootedones.MrTrumpisconstrainedbyCongress,anindependent
judiciary,afreepressandabureaucracywithalongtraditionoffollowingthe
law.MrLópezObrador,bycontrast,willgovernacountrythathasbeen
democraticonlysince2000,andwherecorruptioniswidespreadandgrowing

worse.Thenextpresident’smainjobshouldbetoreinforcetheinstitutionsthat
underpinamoderneconomy,democracyandabovealltheruleoflaw.Therisk
withMrLópezObrador,whowillbethefirstnon-technocraticallyminded
presidentin36years,isthathewilldopreciselytheopposite(seeBriefing).
Mexicantechnocracyhashaditssuccesses.Orthodoxeconomicpolicieshave
ensuredrelativelysteadyifunspectaculargrowthsincethe1990s.Thankstothe
NorthAmericanFree-TradeAgreement(NAFTA)withtheUnitedStatesand
Canada,whichtookeffectin1994,Mexicoistheworld’sfourth-biggestexporter
ofmotorvehicles.Theoutgoingpresident,EnriquePeñaNieto,openedenergy
andtelecomstocompetitionandistryingtoimposehigherstandardsonafailing
schoolsystem.Alas,progresshasbeenslowerthanpoliticianspromisedandis
uneven.Mexico’ssouth,whereaquarterofthepopulationlives,hasox-drawn
ploughsratherthanassemblylines.ByMexico’sownmeasure,nearly44%ofits
citizensarepoor.
ThemainsourceofMexicans’discontentisnotinequalitybutcrimeand
corruption,whichhaverunriotunderMrPeña.Themurderratehasbrokena


recordsetin2011.Therulingpartyhasseencountlessscandals.Itemergedthat
MrPeña’swife’s$7mhomehadbelongedtoagovernmentcontractor.Inan
ordinaryelection,MexicanswouldditchMrPeña’sInstitutionalRevolutionary
PartyandturnbacktotheconservativeNationalActionParty.Butafteritslast
crime-riddenyearsinpower,from2006to2012,theyarefedupwiththat,too.
Theywantchange,whichMrLópezObradorcertainlyoffers.
ThefirebrandfromTabasco
Whatsortofchangeremainstobeseen.Thebiographythatbeguileshis
supportersisrepletewithdangersignals.Timeandagainhehasshowncontempt
forthelaw.Hehasurgedpeoplenottopaytheirelectricitybills.Afterhelostin
2006hissupportersproclaimedhimthe“legitimatepresident”andblocked
MexicoCity’smainstreetforweeks.Hehassaidthatthecourtsshouldbean

instrumentof“popularsentiment”.
Hissupporterssayhehasmatured,andthathisrecordasMexicoCity’swelllikedmayorfrom2000to2005showsthathewasalwayspragmatic.Hehas
madehispeacewithNAFTAandnolongertalksofreversingtheenergyreform.
Hepromisestorunadisciplinedbudget,torespecttheindependenceofthe
centralbankandnottoraisetaxes.Someofhisideas,likeanationwide
apprenticeshipprogramme,makesense.
Butheseemstohavelittleideahowamoderneconomyordemocracyworks.He
disparagesindependentinstitutions,suchasthesupremecourt.Hetalksof
makingMexicoself-sufficientinfoodandofbuildingoilrefineries,whichare
unlikelytomakebusinesssense.Hisideasaresimplistic.Hewantstohalvethe
salariesofseniorofficials,includingthepresident,andtosubjecthimselftoa
recallreferendumeverytwoyears.Thoughpersonallyclean,hehasformed
allianceswithpoliticianswhoareanythingbut.HedenouncesMrPeña’s
educationreform,whichofferspoorchildrenachanceofabrighterfuture.Yes,
MrLópezObradorhasreinventedhimself,butasabundleofcontradictions.
Thatmakeshispresidencyariskyexperiment.Thefinancialmarketsmighttame
aLópezObradorgovernment.Butacongressionalmajorityforhispartymight
equallyencourageradicalism.Itmightgowellif,say,hecurbscorruptionor
standsuptoAmericaovertrade.Morelikely,progresswillremainelusive.
MexicocannotstopgraftwithouttheinstitutionsMrLópezObradorscorns.And
withprotectionistsatthehelminitstwobiggestmember-states,NAFTAcould


wellcollapse.ThatwouldfurtherpoisonrelationswiththeUnitedStates,
possiblyimperillingco-operationoverdrugsandimmigration.Weworryabout
MrLópezObrador’spresidency,butwishhimluck.Ifhefails,worsemay
follow.
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Timetogo

Turkey’spresidentdeservestoloseonJune24th
Failingthat,votersshouldatleastelectaparliamentthatcancheckhim

Jun21st2018
WHATdoesapresidenthavetodotodestroythetrustofTurks?Debauchingthe
currency,poisoningrelationswithEuropeandAmerica,lockinguptensof
thousandsofinnocentpeople,muzzlingthepress,reignitingacivilwarand
fiddlingwiththeconstitutiontogainthepowersofasultansurelyoughttobe
enough.RecepTayyipErdoganhasdoneallthatandmoreinrecentyears.When
voterscasttheirballotsinpresidentialandparliamentaryelectionsonJune24th,
theyshouldshowhimthedoorofhisvastnewpalaceinAnkara.
TherewasmuchtoadmireinMrErdoganwhenhisJusticeandDevelopment
(AK)partyfirsttookpowerin2002.HeshowedthatanIslamistpartycould
governwithmoderation;womeninTurkeyarefreetowearwhattheylike.The
economyhasboomed.GDPhasmorethandoubled,andtheresults,intermsof
roads,bridgesand,aboveall,plentifulandcheaphousing,areplainforalltosee.
Thearmywastamed,Kurdish-languagerightswererecognisedandaccession
talkstojointheEuropeanUnionbeganin2005.
Butpowerrotsleaders.Ashebecomesmoreautocratic,MrErdoganisreversing


hisownachievements(seearticle).Artificiallylowinterestrateshavecauseda
slumpinthelira(down55%inthepastfouryears),pushedinflationupto
doubledigitsandledfirmstooverloadthemselveswithdebt.Afteraperiodof

breakneckgrowth,ahardlandingseemsimminent.ThewaragainstKurdish
militantshasresumed,bothinthesouth-eastofthecountryandacrosstheborder
inSyria.AsrelationswithNATOandtheEUdeteriorate,MrErdoganhasstruck
upanallianceofconveniencewithRussia.
TheviciousattemptedcoupofJuly2016deservedtofail.ButMrErdogan’s
revengehasbeenindiscriminateanddisproportionate.Some110,000people
havelosttheirjobsinthearmy,schoolsandthebureaucracy;morethan50,000
peoplewerearrested,ofwhom35,000havebeenconvicted.Takingadvantageof
aclimateoffearandastateofemergency,MrErdoganpushedthrougha
constitutionalreformthatturnsTurkeyfromaparliamentarytoapresidential
system,greatlyreducingthepowerofthelegislaturetocheckanow-mighty
president,ie,himself.Thesechangeswereapprovedbyaclosereferendumin
2017,amidcredibleallegationsofcheating.
Avoteforpluralism
Forallthesereasons,MrErdoganshouldgo.Whoshouldreplacehimisless
obvious.Ofthealternatives,SelahattinDemirtas,theleaderoftheHDP,the
mainKurdishparty,isimpressivebuthasnochanceofwinning—notjust
becauseheisaKurdinacountrythatmistruststhem,butalsobecauseheis
campaigningfrombehindbars,havingbeenjailedontrumped-upterrorism
charges.Onbalance,MuharremInce,aformerteacherwhonowrepresents
KemalAtaturk’soldparty,theCHP,isthebestoption.DespitetheCHP’sstatist
instincts,MrInceisastrong-mindedanddecentcandidate.Hehasmadeapoint
ofvisitingMrDemirtasinprison;asthechildofobservantMuslims,hecould
winoversomeAKvoters.
PollssuggestthatMrIncewillfindithardtowinevenifhecanforceMr
Erdoganintoarun-offonJuly8th.Thatmakestheparliamentaryballot
especiallyimportant.ThereisagoodchancethatAK(andasmallerally)will
loseitsmajority.Forthattohappen,though,theHDPwillhavetocleara10%
thresholdoritwillgetnoseatsatall.Votersshouldoptforitwherevertheycan.
EvenifMrErdoganwinsre-election,anopposition-controlledchamberwillbe

abletospeakoutagainsthisabuses,blockhisdecreesandperhapsreversehis
constitutionalchanges.Anychecksandbalancesarebetterthannone.Tostop


thesultan,Turkeyneedsaneffectiveopposition.
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Don’tcrashit

Couldatradewarderailglobalgrowth?
Risingtariffsaretheworstofmanythreatstotheworldeconomy

Jun21st2018
LOOKattheheadlines,andyouwouldstruggletobelievethattheglobal
economyisingoodhealth.PresidentDonaldTrumpcontinuestofireoffvolleys
inhisinchoatetradewar,throwingfinancialmarketsintoturmoilanddrawing
retaliation.TheFederalReserveisraisinginterestrates—anactivitythatusually
endsinarecessioninAmerica.Tightercreditandarisingdollararesqueezing
emergingmarkets,someofwhich,suchasArgentina,areunderseverestress.
Yettheworldeconomyisthriving.Growthhasslowedslightlysince2017,but
stillseemstobebeatingthelanguidpacesetinthefiveyearsbeforethat.
Americamayevenbespeedingup,thankstoMrTrump’staxcutsandspending
binge.Ahigheroilprice,whichinpasteconomiccyclesmighthavebeenadrag,
istodayspurringinvestmentintheproductionofAmericanshale.Some
forecastshavegrowthexceeding4%inthesecondquarterof2018.

Thissugarrush,however,bringsdangers.Thefirstisthatitprovidestemporary
politicalcoverforMrTrump’srecklessness.Thesecondisthat,ifAmerica
acceleratesandtherestoftheworldslows,wideningdifferentialsininterest


rateswouldpushupthedollarstillmore.Thatwouldworsenproblemsin
emergingmarketsandfurtherprovokeMrTrumpbymakingitharderforhimto
achievehisgoalofbalancedtrade.
Thetradewaristhebiggestthreattoglobalgrowth(seearticle).OnJune15th
theWhiteHouseconfirmedthata25%tariffonupto$50bnofChineseimports
wouldsoongointoeffect.Threedayslater,afterChinapromisedtoretaliate,the
presidentexpanded,byasmuchas$400bn,theothergoodsAmericais
threateningtotax.Ifhefollowsthrough,nine-tenthsofroughly$500bn-worthof
goodsimportedfromChinaeachyearwillfaceAmericanlevies.Meanwhile,the
EuropeanUnionispoisedtoimposeretaliatorytariffsinresponsetoAmerica’s
actionagainstEUsteelandaluminium.Nowondermarketshavecaughtthe
jitters.
I’llseeyouanderaseyou
Thepresidentisunafraidofescalatingtradedisputesbecausehebelieveshehas
awinninghand.AmericabuysfromChinaalmostfourtimesasmuchasitsells
there,limitingChina’sabilitytomatchtariffs.TheWhiteHousehopesthis
imbalancewillleadChinatoyieldtoitsdemands,someofwhich(cuttingthe
theftofAmericanfirms’intellectualproperty)aremorereasonablethanothers
(shrinkingthebilateraltradedeficit).


ButMrTrumpoverestimateshisbargainingpower.IfChinarunsoutof
Americangoodstotax,itcouldraiseexistingtariffshigher.Oritcouldharass
AmericanfirmsoperatinginChina.Moreimportant,thepresident’s
mercantilismblindshimtothedamagehecouldinflictonAmerica.Hethinksit

isbetternottotradeatallthantorunatradedeficit.Thisfollyalsodictateshis
tacticstowardsCanada,MexicoandtheEU.MrTrumpcouldyetwithdrawfrom
theNorthAmericanFree-TradeAgreementandslaptariffsoncars.
TheproblemisnotthatAmericadependsontrade.Infact,itisabigenough
free-tradeareafortheeventualdamagetoGDP,evenfromafullyfledgedtrade
war,tobelimitedtoafewpercentagepoints(smaller,specialisedeconomiesare
moredependentontradeandwouldsufferalotmore).Suchself-inflictedharm
wouldimposeapointlesscostontheaverageAmericanhouseholdofperhaps
thousandsofdollars.Thatwouldbebad,butitwouldhardlybefatal.
Thebiggerissueisthevastdisruptionthatwouldoccurinthetransitiontomore
autarky.America’seconomyisconfiguredfordesigningiPhones,notassembling
theircomponents;theinnardsofitscarsandplanescrossnationalbordersmany


timesbeforethefinalproductisready.Facedwithtariffs,firmshavetoredirect
labourandcapitaltoreplaceimports.
SomeanalystsattributeMrTrump’spresidencytotheeconomicshockfrom
tradewithChinaafter2000.Theturmoilcausedbyreversingglobalisation
wouldbejustasbad.OneestimateputsAmericanjoblossesfromatradewarat
550,000.ThehittoChinawouldalsobesevere.Anyadjustmentwouldbe
prolongedbyMrTrump’sunpredictability.Withoutknowingwhethertariffs
mightriseorfall,whatcompanywouldthinkitwisetoinvestinanewsupply
chain?
Itisdifficulttoimaginesucharealignmentwithoutaglobalrecession.Tariffs
temporarilypushupinflation,makingitharderforcentralbankstocushionthe
blow.Theflighttosafetyaccompanyinganyglobaldownturnwouldkeepthe
dollarstrong,evenasAmerica’sfiscalstimuluspetersoutafter2019.
Sobewary.Thetradewarmayyetbecontained,tothebenefitoftheworld
economy.ButAmericaistheengineofglobalgrowth.InMrTrump,adangerous
driverisatthewheel.

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Stopit

HowtheWest’simmigrationpoliciesclashwithvalues
Andwhythevaluesusuallywin

Jun21st2018
INTEXASaninfantisseparatedfromhismotherbythefederalgovernmentto
deterothersfromcoming.IntheMediterraneanaboatwithsome630migrants
onboardispreventedfromdockingatanItalianport,andItaly’sdeputyprime
ministerseekstoboosthispopularitybythreateningtoexpelRomapeople.In
Berlinacoalitiongovernmentmayfalloverhowtohandleimmigration(see
article).Thesethingsmightlookseparate;infacttheyareconnected.
Thefailuretogainpoliticalconsentforimmigrationhasbeenimplicatedinthe
biggestupheavalsintheWest:Brexit,DonaldTrump’svictory,thegripViktor
OrbanhasoverHungary,theriseoftheNorthernLeagueinItaly.Allthese
eventshavepushedpoliticsinadirectionthatisworryingforthosewhoprefer
theirmarketsfreeandtheirsocietiesopen.Thiscreatesapainfultrade-off.Resist
thedemandsformorebrutalimmigrationenforcement,andelectoratesmaykeep
votingforcandidateswhothriveonblamingforeignersforeverything.Accept
thesolutionsproposedbythelikesofMrTrump(seearticle)orMrOrban,and
Westernsocietieswilloffendagainsttheirfundamentalvalues.