2018-08-08

Did Everyone Forget the J-Curve

Not only has the trade war not kicked off in earnest, but it seems nobody has ever heard of the J-curve as it relates to growth and exchange rates. Nations don't change their economic structures overnight and orders are placed months in advance. Increased growth in the United States increases the trade deficit, it boosts imports from China. Additionally, the trade war has its own J-curve effect as importers and exporters rush orders ahead of potential tariffs.

Bloomberg: China Imports Jump, Exports Robust as Trade War Yet to Take Toll
Exports rose 12.2 percent in July in dollar terms from a year earlier, the customs administration said Wednesday, faster than the forecast 10 percent. Imports climbed 27.3 percent, leaving a trade surplus of $28 billion.

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