Opinion

The Coming Sino-American Bust-Up

Nouriel Roubini

By Nouriel Roubini

In the short term, a planned meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, at the G20 Summit in Osaka on June 28-29 is a key event to watch.

By Nouriel Roubini

The nascent Sino-American cold war is the key source of uncertainty in today’s global economy. How the conflict plays out will affect consumer and asset markets of all kinds, as well as the trajectory of inflation, monetary policy, and fiscal conditions around the world. Escalation of the tensions between the world’s two largest economies could well produce a global recession and subsequent financial crisis by 2020, even if the US Federal Reserve and other major central banks pursue aggressive monetary easing.

Much, therefore, depends on whether the dispute does indeed evolve into a persistent state of economic and political conflict. In the short term, a planned meeting between US President Donald Trump and his Chinese counterpart, Xi Jinping, at the G20 Summit in Osaka on June 28-29 is a key event to watch. A truce could leave tariffs frozen at the current level, while sparing the Chinese technology giant Huawei from the crippling sanctions that Trump has put forward; failure to reach an agreement could set off a progressive escalation, ultimately leading to the balkanization of the entire global economy.

Read the full Project Syndicate article.
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Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.