Bleaker

The world’s economic outlook just got bleaker.

Numbers show that the US economy contracted by 0.3 percent through the first quarter of this year. When the US economy shrinks, it drags down the rest of the global economy.

Days before, a government report indicated that American consumer confidence declined significantly. There is growing pessimism among American consumers. Pessimism is normally a self-fulfilling prophesy.

Shipping data likewise indicate a rapid decline in trade. The port of Los Angeles, where most deliveries from Asian exporters enter, is nearly idle. Industry analysts say that scarcely filled ships are returning to the US. The decline in trade volumes should be visible in emptied supermarket shelves in a few weeks.

It is nearly certain that the US economy will enter into at least a technical recession at the end of the second quarter. The first quarter numbers do not yet capture the chaos and the uncertainty inflicted by Trump’s whimsical tariffs the day after April Fool’s Day.

More concerning, the first quarter GDP report may be understated. Economic activity during this period was boosted by massive stockpiling of inventory by US importers in anticipation of a trade war. Stockpiling by wholesalers was matched by frantic buying by consumers hurrying to beat higher prices due to tariff impositions. The inventory buildup reflects as investments in calculating the GDP.

Even more concerning, the gap between reality and economic fantasy among American leaders grows by the day.

The day before the damaging GDP numbers were released, Trump bamboozled Jeff Bezos over Amazon’s plan to indicate the exact impact of tariffs on whatever they sell. Trump continues to tell his people that the exporting countries will pay for the tariffs he unilaterally imposed.

On the day the GDP numbers were released, Trump held a rally among his faithful. During that rally he proclaimed that America’s “Golden Age” has come and that (contrary to what the opinion polls say) he had the most successful first hundred days in his second presidency. Trump’s loyalists meanwhile dismissed the polling numbers as “fake news.”

After the GDP numbers were released, Trump blamed his predecessor Joe Biden for the contraction. The US economy grew by a healthy 2.4 percent in each of last year’s four quarters.

On the same day, Trump convened a meeting of his Cabinet. It was a ceremony of sycophancy. The members of the Cabinet took turns praising Trump’s work in a manner that will put Kim Jong-un’s ministers to shame.

While Trump grew the gap between reality and his fantastic version of it, the rest of the world watched absolutely aghast. Here is an administration living off its own hubris unchecked by Republican-controlled Congress and, increasingly, the judicial system.

Trump truly believes he is a “stable genius.” He builds a bubble around himself, impermeable to economic reality.

Endurance

Somehow, the possibility of empty supermarket shelves must be haunting the American president. The complete blockade of trade between the US and China will hit American consumers really hard in the coming months.

So anxious is Trump about lifting the blockade, he lied about getting a call from Chinese president Xi Jinping. Beijing has declared that there are absolutely no negotiations or consultations going on between the two largest economies. Beijing demands that the unilaterally imposed tariffs be withdrawn as a precondition for any talks.

From all indications, Beijing is prepared to tough it out with Trump. It has now become a contest of endurance between the two countries.

Both countries will certainly endure economic pain. Beijing is confident it can better weather the adverse economic fallout.

China, after all, will suffer no shortages in this standoff. Over the past few years, since the first Trump administration, it has diversified sourcing for soya beans and other agricultural products. It has likewise diversified its export markets, building strong global partnerships by way of trade-driven diplomacy.

If the US and China prolong this trade confrontation, the Asian economic superpower will suffer from inventory overload – but not much else. By contrast, the US has evolved a strong dependence on Chinese imports for much of the consumer goods it needs.

China may have some financial vulnerabilities due to overexposure to the property development sector. But the US is many times more vulnerable. It is the world’s most indebted country. US economic growth is consumption-driven. Its gross domestic product is inflated by the oversized financial sector, constituting what one economist described as “financial sorcery” passing off as productivity.

China has halted importation of America’s biggest export item: passenger jets. It has shifted imports of agricultural products to Brazil and emerging African economies. It has restricted exports of rare earth minerals over which China enjoys near monopoly. This will harm most producers of consumer electronics.

American officials have underestimated China’s economic resiliency. When Beijing restricted beef importation from the US, one American legislator suggested that the US sell its beef to India. He needs a quick briefing on Hindu practices.

US Vice President Vance spoke derisively of Chinese “peasants.” He is oblivious to the fact that China’s infrastructure is now far superior to the America’s.

Notwithstanding US bans on China acquiring advanced chip technologies, Chinese manufacturers unveiled, over the past few weeks, cutting edge electronics as well as artificial intelligence programs. China’s electric vehicle technologies lead the world.

Trump, meanwhile, has to deal with rapidly eroding job approval ratings along with a polarization of American public opinion.