At the start of the year, hopes and expectations were that the US and China would come to a relatively speedy resolution on trade and the world economy would be set once again on a moderate path of expansion. These hopes have been repeatedly disappointed. Instead the failure of negotiations has seen the US escalate the dispute, prompting tit-for-tat tariff responses from China.
The impact on world trade is becoming ever more pronounced. The OECD’s Composite Leading Indicator fell to 99.06 in June, registering consecutive monthly falls since December 2017 and is now at its lowest level since the financial crisis of 2009. Growth in global container trade dropped to 1.3% in the first half of the year, compared with growth of 4.5% in the same period of last year.
In its latest oil market report, the International Energy Agency (IEA) put oil demand growth for January-May at just 520,000 b/d, noting it was the lowest increase for the period since 2008. Oil demand growth estimates for 2019 and 2020 were revised down by 0.1 million b/d to 1.1 million b/d and 1.3 million b/d respectively.
With further tariffs set to be imposed by the US on China September 1, and China ending purchases of US agricultural goods in response, the situation is unlikely to improve. The IEA commented that there is a greater likelihood of a further downward revision to oil demand than there is of an upward one. As suggested in earlier articles, the bottom of the downturn has yet to…