There are several themes playing out in the international game of brinksmanship. There is the sad game of the English political establishment trying to come up with a Brexit plan that will be least painful. Unfortunately, that effort is certain to end in failure. Brexit will mean higher unemployment, slower growth and increased squabbles among the remaining English policy makers. Prime Minister May’s plan for broader trade deals post Brexit is also going to fail. The plan comes at a time when the US is imposing its trade restrictions and tariffs.
Brexit has driven the EU closer together and so has the US tariff scheme. Once fully in effect, the US tariffs undoubtedly will be hurting the US economy in a broad sense, where every trading partner will institute its counter-measures. It is unclear so far which will be the most painful and who will get hit the hardest. The farm sector is clearly being hit. The automobile sector will suffer, too. And the general public will feel the pain from higher unemployment.
Germany, long the stalwart of the European economy, is suffering from increasing divisions in the top party establishments. The Bavarian CSU wants to have a bigger say in the country’s decision-making efforts while the main part of the right-leaning party, the CDU, is floundering. Indeed, Chancellor Angela Merkel is limping along trying to find her footing in the aftermath of the past election. It almost seems that Chancellor Merkel has been around too long and should fade into retirement rather than continue four more years as chancellor.
In the Far East the squabbles between the Trump administration and China’s leadership is getting more pronounced with China still trying to decide how hard it should hit back at the US. Trade is not the only area of contention. There is also the problems with islands in the South China Sea where there is no sign of a resolution.
The North Korea situation remains unresolved. Pyongyang seems to be increasing its nuclear arsenal rather than shrinking it as advertised by President Trump. Where that issue is going is impossible to predict.
Uncertainty can be seen everywhere and there is no indication that this factor will improve anytime soon. Unemployment in the US has not yet reared its ugly head nor has inflation, but that does not mean that both these destructive forces will remain dormant.