Global economy is resilient, for now

Dour outlook in the spring turns into a shrug; risks abound but growth continues

- HOWARD SCHNEIDER MARK JOHN

Threats to the global economic order have come at a furious pace during President Donald Trump's first eight months in office — from a massive tariff shock to a battle for control of the Federal Reserve and even an emerging form of US state capitalism.

But the reaction in terms of world equity and bond markets and economic activity has been a somewhat remarkable shrug: The global economy has kept growing, stock prices have surged, and inflation fears remain muted.

While many players worry that things could still unravel given the right spark, it is a far cry from the dourest predictions early in Trump's term, when recession odds soared, markets plummeted, and headlines even fretted over the cancellation of Christmas in a collapse of global trade.

“The global economy continues to exhibit considerable resilience amid heightened policy and political uncertainty,’ BNP Paribas economists wrote recently, attributing it to “supportive financial conditions, robust household and corporate balance sheets, the promise of an Al-driven productivity boost, and lower energy prices, among other factors.”

Perhaps the biggest factor is that one of the deepest early fears — a trade war of steadily rising tariffs and a halt to global shipping — has not materialised.

Deals, albeit sketchy, are in place with exporting nations in Europe and Asia. And while the landscape remains in flux, the accommodation shown by US trading partners threatened with sky-high tariffs resulted in more modest levies that are being shared by exporters, importers and consumers in what economists say has become a manageable distribution.

Meanwhile, Trump's attempts to oust the Fed chair and fire one of its governors, potentially among his most-disruptive efforts, have so far failed, and financial markets appear willing to ignore the risk of rising White House influence over monetary policy until it happens.