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On Sunday, Trump decided to go ahead with new tariffs of 15% on clothing and other Chinese imports totally about $111 billion. The new tariffs are in addition to the 25% tariffs previously imposed on about $250 billion of Chinese imports.

No one should be surprised that the knock-on impact of Trump's Trade War Hurts South Korea and Japan

South Korea said Sunday that its exports to China fell 21.3% in August compared with the same month a year earlier, driving an overall 13.6% decline in exports. And Japan said Monday that capital spending by the country’s manufacturers fell 6.9% in the April-June quarter, the first decline in two years, as companies grappled with a nearly double-digit decline in exports to China.

“Given that there is no sign of recovery in Japan’s exports due to the U.S.-China trade friction, the downtrend in manufacturers’ profits and capital expenditures is expected to continue,” said NLI Research Institute analyst Taro Saito.

Even after decades of growing economic interdependence, exports to China by themselves account for a small portion of the total output of countries like Japan and South Korea. In Japan’s case, exports to China equaled 2.8% of gross domestic product in the year ended March 2019. But a falloff in exports could trigger a broader downward cycle by leading companies to slash investment or by making consumers more cautious.

Manufacturing Recession

On August 2, I commented Global Manufacturing Recession Started: Trump's China Tariffs Made Matters Worse

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It is increasingly clear that is the correct view. But what about a real recession?

How Much Lead Time Do You Expect?

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Once again please consider Manufacturing Recessions vs Real Recessions: How Much Lead Time Do You Expect?

For further discussion, please see Debunking the Myth “Consumer Spending is 67% of GDP”.

Mike "Mish" Shedlock