Moreover, the positive developments that have helped to keep economic momentum going for now, such as falling oil prices and a stabilising Chinese economy, will not be enough to offset the headwinds as they intensify.
The global economy has remained relatively resilient even as institutions like the World Bank and the International Monetary Fund (IMF) have been projecting slower growth for the rest of the year. Equity markets have soared to new record highs even though bond markets and currencies have been a bit more circumspect. It is almost as if the unfinished wars in Europe and the Middle East, the worsening dislocations from the trade war, high levels of business and consumer uncertainty and a deteriorating American fiscal position and all that it implies for the US dollar do not matter.
This benign situation cannot last. The main reason is that the slowdown process is a slow burn: once companies realise the full impact of the trade war, they will reduce their capital spending and hiring, which would then depress economic activity everywhere.
