Around three weeks ago the Swedish National Institute for Economic Research (KI) released a document detailing the current situation in the Swedish economy. According to KI the Swedish investment lead economic boom has peaked. Now the Swedish economy might be relatively small and insignificant to the global economy but I still find this very interesting. One thing to consider is that Sweden is far from the only export-dependent north European economy and the fact that the boom peaked in June, before most American tariffs had taken effect. This is probably a bad sign as the new reality of global trade policy might have taken hold by the time the these north European export economies whic need to recover from an economic slump. Tariffs and non-tariff barriers to trade give domestic producers a large advantage over foreign rivals in terms of price which will make consumers choose the domestic product, assuming the two are close in terms of quality, which is bad for small highly specialised economies. Furthermore, in an economic downturn states with control over their own monetary policy usually try to lower exchange rates so that their products become cheaper abroad, thus lessening the blow to the economy. The effectiveness of such a policy is severely constrained when there are both tariffs and other barriers to trade where the government hopes to increase exports to.
Greece is a recent example of an economy which needed increased exports to recover from a crisis but couldn't, and while the situation we find ourselves in is different there are some similarities. Namely that falling domestic consumption would need to be padded out with foreign demand but couldn't be as the domestic goods couldn't compete with foreign rivals' prices. As mentioned the root of the problem is different but the possible situation is similar.
Now I'm obviously not saying that the coming economic downturn is neccesarily worse than 'normal' downturns, if indeed there is a 'normal' downturn, but if the much talked about trade war continues to deteriorate into full-scale protectionism it might very well be.
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