- Trade wars, the pandemic, and geopolitical tensions have disrupted global supply chains.
- Reshoring efforts are increasing in an attempt to bring more manufacturing back to the US.
- Bank of America says domestic small- and mid-cap stocks in sectors like industrials and healthcare may benefit most.
The 2000s was the golden era of globalization. The idea of interconnectedness across borders held the promise of lowering consumer prices and increasing economic growth by allowing each country to specialize in what it was best at.
But the economic part of that equation has taken a few hits lately as free trade has faced increased challenges.
In 2018, tariffs imposed by the Trump administration kicked off a trade war with China. By 2019, a 21% tariff was imposed on Chinese imports. China responded with a 21.8% tariff on US goods.
Then, the pandemic hit, shutting down the global economy and causing ripple effects from supply chain issues. The standstill called attention to countries’ dependence on each other for trade. For instance, China’s decision to halt its manufacturing sector for a prolonged period aggravated US inflation.
This year, rising geopolitical tensions in the Middle East caused friction for shipping routes in the Red Sea.
https://www.msn.com/en-us/money/markets/ar-AA1tSr13
(Bloomberg) — Australia faces the threat of short-term economic pain in the form of reduced output and further inflation pressures as a result of incoming US President Donald Trump’s policy agenda, according to Treasurer Jim Chalmers.
Revealing the findings of Treasury modeling undertaken in anticipation of a Trump win, Chalmers said while there would be a “small reduction in our output and additional price pressures,” the features of Australia’s economy would leave it better off compared to other nations.
“The timing of this, and the responses and ramifications that might follow – what economists call second-round effects – are difficult to predict,” Chalmers will say in a speech tonight, according to extracts provided in advance by his office. “But we wouldn’t be immune from escalating trade tensions that might ensue.”