THE OVERARCHING story of 2019 was trade—to be precise, trade war. China’s rise, technological innovation and above all the protectionism of America’s president, Donald Trump, forced companies to rethinksupply chains, especially within NAFTA, the three-country block that for a quarter-century knit America, Canada and Mexico into something close to a single market for goods. Just before the year ended the Trump administration’s negotiators got their reworked replacement for NAFTA, the USMCA,over the line—a rare moment of alignment between Democratic lawmakers and the president they are trying to impeach. The year ended with far higher tariffs on Chinese imports to America; China sought new export markets withsurprising success. As American trade negotiators followed painstaking, formal processes, the president delighted in hurling online grenades, announcing unexpected tariffs by tweet. The resulting uncertainty weighed oninvestment and the global economy.
The global, rules-based trade system frayed at the edges. The World Trade Organisation, seen by America as a constant source of irritation and overreach, finished the year without a functioning appellate body, asthe Trump administration blocked new appointments. Future disputes will go through hearings of first instance, and then countries will be back to bilateralism. Nothing will fall apart immediately, but even as the world becomes more protectionist and populist, the loss of an independent referee dealt the trade system another blow.
The trade war sent global markets see-sawing. The year started with renewed hopes that the Trump administration would come to an accommodation with China, and markets surged. When those hopes proved premature,fears of a global recession increased and investors rushed to the safety of bonds. They became accustomed to a new normal: negative bond yields. But by the end of the year there were signs of stabilisation in global manufacturing, and investorsregained their appetite for risk, returning to commodities and emerging-market currencies.
As the world economy slowed, the Federal Reserve began cutting interest rates. America’s economy resisted the pull of recession, and the easing gave emerging markets some respite after a difficult few years. Despite the slowdown, China resisted the urge to unleash a large-scale stimulus. In Europe,Christine Lagarde replaced Mario Draghi as boss of the European Central Bank, where she inherits the job of using monetary policy to gin up the continent’s lacklustre economy. Germany’s manufacturing sector started the year in bad shape and found no respite. The countrybarely escaped recession.
Throughout the year, the race between banks and fintechs continued to accelerate. Nimble startups nibbled away at conventional lenders’ market share in the extortionate business of moving money across borders. Boosted by e-commerce and the popularity of contactless payments, behemoths once seen as dreary thrived and merged, raising questions about modern societies’ readiness for a largely cashless future. The technophobic insurance industry faced rising perils, from reinsurers eager to cut out the middlemen to catastrophic losses caused by climate change. But the biggest threat of all came from the giants that rule smartphones—Google, Apple, Facebook and Amazon—whose attempts at entering financial services may well hollow out the champions of old.