China is also making some course corrections. In the near term, emerging economies in Asia will have to endure higher risk aversion, which will make their currencies and asset values susceptible to big swings. They will also have to deal with a number of major structural shifts. In a rougher world, emerging economies will have less room for error.
The startling changes brought in by the Donald Trump administration have unnerved one and all. Financial markets, businesses, consumers and policymakers simply don’t know what these moves mean for growth and inflation, nor do they have a good fix on how bad the downsides in geopolitics might be. In fact, uncertainty alone is proving corrosive for the world economy as firms defer capital spending and hiring until they can make sense of what is happening around them.
Unpredictability is all around us but some things are actually crystal clear. The US is no longer a stabilising anchor for the world. Rather, it will be a disruptor. Europe has realised this and is undertaking transformational changes.
