"What happened in the world economic stage last year?"
2018 having just slipped into history, it is now possible to look back and select the last 12 month’s stories that had the greatest significance for the world economy.
US President Donald Trump’s Tariff Wars. In line with candidate Donald Trump’s promise to stop the US from being disadvantaged by its trade partner, the US slapped tariff on imports of steel and aluminum, and subsequently, imposed tariff on close to $200 million worth of Chinese products. Trump’s tariffs—a part of his vow to “make America great again”—severely hurt the exports of the US’s historical allies, including EU (European Union), Canada, Japan and South Korea. Needless to say, the exporters of steel and aluminum retaliated by imposing tariffs on a number of US exports, including goods produced by states comprising Trump’s political base. China responded in commensurate fashion, slapping tariffs on over $100 million worth of goods important to the US’s export Trade. At a November G-20 meeting in Argentina, President Trump and China’s President Xi Jinping agreed on a 90-day moratorium intended to allow both sides to reassess their positions.
Volatility of the World Oil Market. After a comparatively long period of weakness, the world oil market became active anew, with the posted prices moving up to the vicinity of $80 per barrel—the result of production-cutting by OPEC (Organization of Petroleum Exporting Countries) acting in concert with the world’s second-largest oil exporter, Russia. The US responded by increasing its production output. Toward yearend, the posted prices for Brent and West Texas Oil were moving toward the $60 per-barrel level.
Increase in US Fed’s Basic Rate. When the US Fed (Federal Reserve Board) sent out signals that it might raise its basic lending rate, the Fed funds rate, President Trump, fearing that an increase in the rate would do damage to the strong performance of the US economy, criticized the Fed and gave indications of wanting to get rid of Fed chairman Jerome Powell. In fact, the Fed felt that a rate increase was necessary in order to allow the continuation of the US economy’s strong performance. Word of Mr. Trump’s fire-the-chairman, though, placed Jerome Powell in the difficult situation of not wanting to be seen as buckling under in the face of a White House threat.
The Brexit Negotiations. With the clock moving relentlessly toward the March 19, 2019 deadline for the conclusion of a deal on the United Kingdom’s exit from EU (European Union), negotiations between London and Brussels became more intense with each passing month. One of the major sticking points was the post-Brexit status of the 150-mile border between Northern Ireland (a component of the UK) and Ireland (a EU member). Both Ireland and the 10-vote Northern Irish party that has been supporting Prime Minister Teresa May’s government don’t want a treaty barrier, along the border. Ms. May is confident that she will be able to come up with a deal acceptable to both EU and the British Parliament, but at year-end no-deal appeared to be a real possibility.
Rise and Fall of the US Stock Market. After a steady upward run that saw the Dow Jones Stock Market Index touch the 26,000 mark, the US stock market fell, at end-2018, to its lowest level in 31 years.
During the trading days immediately preceding Christmas, the Dow, which is composed of 30 of the most powerful stocks listed on the New York Stock Exchange, fell perceptibly to the 21,000 area—in one day it lost 1,000 points—and closed the year at around 23,000. Foreign matters like the tariff doubtless contributed to Wall Street’s volatility, but most knowledgeable observers attributed the decline to the state of dysfunction encompassing Mr. Trump’s administration.
Facebook’s Travails. 2018 was the year that established the fact that the world’s No. 1 social media platform could not be relied upon to totally safeguard the privacy of its users.
The year saw tens of million of Facebook accounts either hacked or “harvested” by unauthorized entities like Cambridge Analytica of the UK, and it saw CEO Mark Zuckerberg summoned to give testimony before legislative and other foreign government bodies. To them, Zuckerberg offered apologies and promises to do a better job of privacy protection in the future. At year-end there appeared to be a universal impression that Mr. Zuckerberg and Facebook were not doing enough toward that end.