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December 21, 2019
Turning Points
Bloomberg

Hello, I'm Tom Orlik, chief economist for Bloomberg Economics. I'm filling in for Andy Browne this week.

It's a familiar holiday experience. In the excitement of the moment, that reindeer sweater seems like the perfect gift. But when the wrapping paper is discarded, realization sets in that it will have limited post-festivities value.

So too may be the case with the partial U.S.–China trade deal and Brexit.

This week in the New Economy

Let's start with trade. The "big deal" hailed by President Donald Trump (above) has averted the imposition of December tariffs and promises to lower some of the levies already in place, as well as deliver incremental progress on China's intellectual property protection.

That's not nothing. Our calculations suggest a partial rollback of tariffs, and reduction in the uncertainty that's blighted markets and business, could deliver a 0.3% bump to global GDP, or about $270 billion.

But it's not everything, either. The U.S. ambition at the start of the trade war was a comprehensive reset of the relationship, with China opening its markets, ending forced technology transfer and halting its anti-competitive industrial subsidies.

That's not what they've got. Past handshake agreements in Buenos Aires at the end of 2018 and Osaka in the summer of 2019 broke down almost before the jets had left the runway. With underlying sources of stress still unresolved, we'll see how long the latest one lasts.

Seven U.K.-U.S. trade deals

In the U.K., a resounding election victory for Prime Minister Boris Johnson's Conservative Party may have taken the worst forms of Brexit off the table. But there's still considerable uncertainty about the future trade relationship between the U.K. and European Union.

Johnson (below) and his promise to "get Brexit done" clearly resonated at the ballot box. But with the reality of long and arduous negotiations setting in, soon it might start to ring hollow on the trading floor, and in the boardroom.

And even successful delivery of Johnson's plans will still leave the U.K. on a slower growth trajectory. It would take the equivalent of seven trade deals with America to make up for the blow British GDP will take when it exits the EU.

Still, things could be much worse, so 2019 ends on a positive note. Whether the December "gifts" of a partial trade deal and Brexit have enduring value in the new year remains to be seen.

Turning Points will be off next week. We'll return in the new year.

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