The Macro Report | April 2018
Trump’s trade bluff?
President Trump in March proposed tariffs on an estimated $50 billion in imports from China, weeks after slapping tariffs on aluminum and steel. In April, China retaliated by imposing tariffs on U.S. imports. While there is low probability the tariff dispute between the United States and China will erupt into a full-scale trade war, the markets are struggling to grasp the implications of the measures. We think the world’s two largest economies will resolve differences through negotiations, but the process could drag on.
The Federal Reserve Bank of New York named John Williams, who has helmed the San Francisco Fed since 2011, as its next president. Assuming one of the top leadership positions at the U.S. central bank, Williams brings expertise and perhaps a dovish disposition. Meanwhile, in Germany, a coalition agreement between the Social Democrats and Angela Merkel’s Christian Democrats could lead to an uncustomary relaxation of fiscal policy. In Asia, Japan’s economy continues to struggle with slow growth and inflation remains below the central bank’s target.
A real war or a sitzkrieg?
While there is low probability the tariff dispute between the United States and China will erupt into a full-scale trade war, the markets are struggling to price the risks.
Fed’s Williams signals continuity
John Williams will assume a top position at the U.S. Federal Reserve, and brings with him policy expertise, and perhaps a dovish disposition on rates.
Japan’s economy weakens
Economic indicators deteriorate as industrial production and the labor market slows; inflation seems likely to fall back.
About the macro report
The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.
Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis
Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis
Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics
Sterling Horne, Analyst
Politics and economics
Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting
Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics