Waiting on China. U.S. and Chinese officials failed to reach a trade agreement yesterday, so last night, U.S. President Donald Trump instructed his staff to begin the necessary paperwork to impose tariffs on $300 billion worth of imports from China, including consumer items that were left out in previous rounds of tariffs. This is in addition to an increase from 10 to 25 percent tariffs on $200 billion worth of U.S. imports from China that went into effect at midnight on Friday. China quickly announced that it would respond with countermeasures of its own but has yet to say what those countermeasures will be – a curious change in behavior for a country that tends to have such retaliations always at the ready. Perhaps China is leaving space for negotiation. Or perhaps China was ill-prepared after President Xi Jinping personally reviewed the proposed trade deal. Or perhaps China simply felt like waiting. We’ll be publishing a longer analysis of the situation in short order, but for now, we have more questions than answers.

It’s beginning to look a lot like 2017. GPF readers may recall that, in our 2017 annual forecast, we said we expected to see a decline in German exports. Our reasoning was that, by the end of 2016, global output was growing faster than trade, and the U.S. – Germany’s most important importer – seemed on the verge of a recession. But it wasn’t to be. German exports and global gross domestic product increased, China kept its stimulus policies in place, and a tax cut gave the U.S. economy new life. The turnaround in Germany is especially dramatic. It wasn’t so long ago that its economy was poised to dip into consecutive quarters of economic contraction; now, Germany’s Federal Statistics Office is reporting a 1.5 percent increase in German exports month on month and a 1.9 percent increase year on year, with increasing exports to non-Eurozone states leading the way – all this on the heels of unexpectedly high German industrial production earlier this week. One month’s encouraging data is not an upward trend, but it was also not what we expected early in the year.

Sabre-rattling in the Middle East. The U.S. Department of Defense announced yesterday that, pursuant to Central Command’s request last week for additional military forces to combat potential threats from Iran, the secretary of defense had approved the deployment of a Patriot missile defense battery to an undisclosed location in the region. It also sent the USS Arlington, an amphibious transport dock, to join a carrier strike group and a B-52 bomber task force already deployed. The U.S. said explicitly that it was not looking for a conflict with Iran but was also ready “to defend U.S. forces and interests in the region.”

Honorable Mentions

  • Venezuela reopened its land border with Brazil. The border had been closed since anti-Maduro groups tried to send humanitarian supplies to Venezuela. Venezuela’s border with Colombia remains closed.
  • Turkey’s defense minister said Syrian government forces needed to halt their advance in northwestern Syria and that Russia needed to make sure the Assad government complied.
  • Belarusian President Alexander Lukashenko said he expected Russia to compensate his government for losses incurred from tainted Russian oil.
  • During a five-day state visit to China, Greece’s president told Chinese news agency Xinhua that he expected Sino-Greek relations to “further deepen.”
  • Uzbekistan’s interior minister hosted China’s justice minister for a visit.