Lunch with Leading Economists
"How Trade Wars Will Hurt Financial Markets: Exploring the Important Linkages and the Effects of Midterm Elections”
Speakers: Robert Wescott, Ph.D., and Elizabeth Rust, Keybridge
The Trump Administration is currently engaged in two different trade wars, one that many consider an unnecessary war with some of America’s traditional allies (like Canada, Mexico, Europe, Japan, and Korea), and also a seemingly real trade war with China. Trade frictions with China center around persistent $375 billion annual U.S. trade deficits, but even more importantly, around China’s “Made in China 2025 Initiative”, its plan to heavily promote 10 industrial sectors for the future, including aerospace, IT, robotics, and electric vehicles—high value-added industries of the future. In this ideas exchange session, Wescott and Rust will begin by providing background behind these trade issues, including some of the causes of China persistent trade surpluses and reasons why the WTO has not been able to deal with China. They then will offer their views on the ways that a trade spat with China could hurt both the Chinese and U.S. economies, and, in particular, could exacerbate China’s huge corporate debt problem (currently 167% of China’s GDP), and present risks for the entire global financial system. In particular, they will discuss possible “backdoor” ways that trade frictions could work their way into financial markets, including through non-tariffs barriers, product boycotts, etc. Finally, they will discuss the midterm elections and their potential effect on these and related issues. The exchange should stimulate debate about the possible spillover effects of trade actions to commodity markets, emerging market economic growth, and world financial stability.
Robert F. Wescott, Ph.D. is President of Keybridge Research LLC. Dr. Wescott has more than 30 years of professional experience working on macroeconomic and public policy issues. Dr. Wescott served for four years as Special Assistant to the President for Economic Policy at the White House and as Chief Economist at the President’s Council of Economic Advisers. From 1982-93, he was Senior Vice President and Chief Economist at Wharton Econometrics (today IHS Markit), where he oversaw a staff of 60 and was responsible for all economic modeling, forecasting, and consulting operations. Dr. Wescott also was Deputy Division Chief in the Research Department of the International Monetary Fund, where he did research on global economic risks and policy challenges. In 1989-90 he was Research Director at the International Center for the Study of East Asian Development in Kitakyushu, Japan. He holds a Ph.D. in Economics from the University of Pennsylvania, and B.A. in Economics (magna cum laude) from Bucknell University, where he was elected to Phi Beta Kappa.
Elizabeth Rust is in the Macro Division at Keybridge, where she focuses on macroeconomic analysis and forecasting, international political economy, and economic policy analysis. Rust speaks regularly to business and professional audiences about U.S. and global economic trends and geopolitical risks. Her recent research and presentations have covered topics such as the U.S. economic outlook, the risks of rising interest rates, the changing nature of retail, millennials in the workforce, emerging financial technologies, and the global rise of populism. She writes regular op-eds on political and economic developments in Europe as a Fellow with Young Professionals in Foreign Policy (YPFP). Prior to joining Keybridge in 2016, Rust worked at The Conference Board’s Europe office in Brussels and the Bologna Institute for Policy Research as a researcher in international and European political economy. Rust holds a Master’s degree in International Economics from Johns Hopkins University’s School of Advanced International Studies (SAIS) and a Bachelor’s degree, magna cum laude, from Cornell University.