At the end of 2018, policymakers were still assessing the immediate effects of Donald Trump’s trade wars. The US Federal Reserve and the European Central Bank both believed that the damage to their domestic economies would be small and temporary, leaving them on course to “normalise” monetary policy by raising policy interest rates as inflation rose towards target. 

In China, there was pessimism about the damaging effect of US tariffs on the economy and scepticism about whether new forms of policy easing would work this time. It was therefore widely assumed that Beijing would make significant concessions to the US to reach a settlement with the Trump administration on tariffs and technology.

Just months later, the policy environment looks very different. Chinese growth has performed relatively well. Supply disruptions to global value chains have so far been largely absent and domestic demand has responded to fiscal and monetary stimulus.