The Trade War Drives Downturn Fear

Online attention to past protectionism, capital flight havens points to growing concern.

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Last weekend was a roller coaster in the US-China trade war. On Friday, after Beijing announced retaliatory tariffs on US exports, President Trump issued a tweet storm announcing even higher tariffs, ordering US companies to “start looking for an alternative to China,” and attacking both Xi Jinping and Fed Chairman Jay Powell. Then over the weekend, after the US stock market had fallen some 600 points, Trump told reporters at the G7 in France that he was having second thoughts about the trade war escalation and later said China was coming back to the table and talks were continuing. Amid the drama, patterns of online attention reflected growing concern that the trade war may exacerbate a looming global economic downturn. 

Predata’s signal that tracks online interest in the various aspects of the Sino-American trade war rose sharply over the weekend to hit its highest level since May, when Washington announced tariff increases of 25% on $200 billion of Chinese goods. The signal remains on an upward trajectory, suggesting concern over escalating tensions have yet to abate, despite Trump’s conciliatory comments toward the end of the G7.

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In a potentially unnerving sign, activity on Chinese-language web pages related to the Smoot-Hawley Tariff Act surged over the weekend. Passed in 1930, Smoot-Hawley raised tariffs on 20,000 imported goods and plunged the world deeper into the Great Depression. Research into the act may mean online audiences fear the current trade war could exacerbate an economic downturn. 

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Further, Chinese-language attention to US banks and gold had risen sharply before the weekend, a sign that the escalating trade war could accelerate capital flight from China. (US banks and gold are both considered safe havens for investors.) A similar pattern of activity occurred earlier in August, when the People’s Bank of China (PBOC) let the RMB fall below the 7 USD/RMB level. The trend in online attention points to rising concern as companies prepare for a prolonged trade war and possible ongoing weakening of the RMB. 

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