Two questions come up repeatedly in the corridors of the World Economic Forum in Davos. First, what is going to happen in the US-China trade war? Second, what is going to happen with Brexit?
There are considerable similarities between these two questions. In both cases, the only sensible answer is some variant of — “I don’t know”. In both cases, there is a strong possibility of a bad “no deal” outcome that could create turmoil in the world economy. And, in both cases, the answer will be revealed in March.
The Trump administration has set a deadline of March 1 for the US to reach a new trade deal with China. Without an agreement, the US has pledged to raise its import tariffs on $200bn worth of Chinese goods to 25 per cent, from the current 10 per cent level. The deadline for Britain to leave the EU is March 29. Without a deal, the default position is that there will be a “no deal Brexit” — in which Britain will crash out of the EU, leading to the immediate imposition of tariffs, the lapse of existing legal agreements and a surge in red-tape and regulations.