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Port workers strike fear in consumers and Dems
President Joe Biden has thus far refused to leverage the Taft-Hartley Act to intervene in the dispute, which impacts roughly half of US sea-borne imports, and more than half of the country’s containerized exports. That means supplies ranging from seafood and electronics to fruits and car parts are at risk. Biden’s facing increasing pressure from Democrats who fear that such a massive economic impact could spell trouble for them come Election Day.
North of the border, Canadian leaders are also worried about possible shortages, ranging from bananas to a lack of car parts to keep the auto industry moving. Now, the US strike has been compounded by a 72-hour work stoppage at the Port of Montreal, Canada’s second largest port, over wages and conditions. Similarly, the ILA wants a new agreement over salaries and limits on the use of automation.
Business groups have said that a three-day strike will result in a 15-day delay in unloading containers, which means much of the fresh produce being shipped through the East Coast ports will have no market value.
Canada’s auto parts sector says it will run out of inventory of imported components after a week or two. Since US$2.7 billion of goods and services move across the border every day, consumers can expect rising prices and a shortage of manufactured imports if the strike continues.
Canadian dock workers to go back to work, but UPS strike still on
Right on the buzzer Thursday, over 7,000 workers at some of Canada’s busiest ports — including Vancouver and Prince Rupert — accepted a settlement proposed by a federal mediator to end their strike.
The dock workers stopped going to work to demand higher wages on July 1st, slowing down $377 million in trade per day. Bringing the two ports to a near halt was nothing to sneeze at, since they handle one-third of goods coming to and from Canada. Economists had warned that if the strikes dragged on much longer, they could have eventually forced the central bank to hike rates even more right when inflation was finally starting to go down.
Meanwhile, in the US, unionized employees of the private shipping firm UPS are still counting the days until their contract expires on July 31st after failing to reach a deal over better pay and working conditions. UPS workers move merchandise worth an estimated 6% of America's GDP, and if the 68% represented by the main union don't show up, only 160,000 workers will be left to do the work normally done by 500,000. It could be the biggest single-employer strike in US history.
The twin strikes are very bad news for the Canadian and US economies right when broken supply chains were just beginning to recover from COVID, and inflation was starting to ease. Those trends could be reversed if more employers and unions in this crucial industry don't find common ground soon.
No one wants a throwback to late 2021-style inflation supercharged by broken supply chains.Episode 8: Global food (in)security
Listen: Following shortages that came out of the COVID pandemic as well as the war in Ukraine, the dual food problems of affordability and availability persist. While temporary impacts may be waning, the experts also discuss the longer-term impacts of the global food production system on the environment and what will - or won't - be sustainable going forward, including the food system's massive dependence on fossil fuels. In the latest episode of Living Beyond Borders, Peter Ceretti, Director of Global Macro Geo Strategy at Eurasia Group, Harlin Singh, Global Head of Sustainable Investing, and Malcolm Spittler, Global Investment Strategist, and Senior US Economist, both at Citi Global Wealth Investments, discuss the latest causes and ripple effects of food shortages around the globe.
In Planting for Tomorrow: Weaving sustainability into the path toward food security, a report from Citi Global Wealth and Eurasia Group/GZERO Media, we take a deep dive into the challenges and the innovations in sustainable agriculture. This newsletter gives you an essential look into the future of food.
Listen:"We need to keep that investment flowing to come up with better ways to do this so that everyone is fed within the constraints of what the planet is able to bear," says Peter Ceretti, Director of Global Macro Geo Strategy at Eurasia Group.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Ceretti is joined by Harlin Singh, Global Head of Sustainable Investing, and Malcolm Spittler, Global Investment Strategist and Senior US Economist, both at Citi Global Wealth Investments, to discuss the latest causes and ripple effects of food shortages around the globe.
Following shortages that came out of the COVID pandemic as well as the war in Ukraine, the dual food problems of affordability and availability persist. While temporary impacts may be waning, the experts also discuss the longer-term impacts of the global food production system on the environment and what will - or won't - be sustainable going forward, including the food system's massive dependence on fossil fuels.
This episode is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability.
Peter Ceretti
Director, Global Macro-Geostrategy, Eurasiia Group
Harlin Singh
Global Head of Sustainable Investing, Citi Global Wealth Investments
Malcolm Spittler
Global Investment Strategist and Senior US Economist, Citi Global Wealth Investments
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
Episode 5: Energy transition today
Listen: "It actually all comes down to one thing and that's money," says Raad Alkadiri, Managing Director of Energy, Climate and Resources at Eurasia Group. "Will there be the money for investment in renewables, in energy efficiency made available? And I'm not just talking about the industrialized world, I'm talking about globally."
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Alkadiri is joined by Malcolm Spittler, Global Investment Strategist and Senior US Economist at Citi Global Wealth Investments, to look at where the energy transition to renewable fuels stands globally, after setbacks from the pandemic and geopolitical instability.
They discuss the increasing need for energy security being a big driver for renewable energy in regions like Europe, how the war in Ukraine is still affecting energy markets, and what kinds of investments need to happen in technology and infrastructure to realize more sustainable and cleaner energy globally.
Malcolm Spittler
Global Investment Strategist & Senior US Economist, Citi Global Wealth Investments
Raad Alkadiri
Managing Director of Energy, Climate and Resources, Eurasia Group
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
- Episode 7: Future-proofing: How we fix broken supply chains ›
- Episode 9: US/China power struggle, the global political balance, and your finances ›
- Episode 1: Should I STILL be worried? ›
- S3 Episode 9: US/China power struggle, the global political balance, and your finances - GZERO Media ›
- Episode 6: Can the US and China find common ground? - GZERO Media ›
- Episode 7: How AI is changing our economy - GZERO Media ›
Episode 4: Broken (supply) chains
Listen: "Other than the impacts of the pandemic, which are easing, and from Russia/Ukraine, I'd say that the greatest risk to global supply chains today and moving forward will likely be from the US-China relationship, and the movement towards selective decoupling," says Jon Lang, Director for Trade and Supply Chains at Eurasia Group.
In the latest episode of Living Beyond Borders, a podcast produced in partnership between GZERO and Citi Global Wealth Investments, Lang is joined by Charlie Reinhard, Head of Investment Strategy for North America at Citi Global Wealth Investments, to discuss how global supply chains have largely adapted to and moved on from changes that occurred during the global pandemic.
While there are some impacts from the war in Ukraine and pent up demand, they also look at how tension between the US and China, as well as increasing regulation and calls for transparency, are changing the shape of supply chains as well as the economy as a whole.
Jon Lang
Director for Trade and Supply Chains, Eurasia Group
Charlie Reinhard
Head of Investment Strategy, North America, Citi Global Wealth Investments
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
- The Graphic Truth: The great supply chain squeeze ›
- Episode 7: Future-proofing: How we fix broken supply chains ›
- Episode 9: US/China power struggle, the global political balance, and your finances ›
- Episode 1: Should I STILL be worried? ›
- S3 Episode 9: US/China power struggle, the global political balance, and your finances - GZERO Media ›
- Episode 6: Can the US and China find common ground? - GZERO Media ›
- Episode 8: Global food (in)security - GZERO Media ›
- Episode 7: How AI is changing our economy - GZERO Media ›
The Graphic Truth: The great supply chain squeeze
The pandemic sent global supply chains into a tizzy. Then, just as economies were embarking on their post-COVID economic recoveries, Russia invaded Ukraine, upending the global grain trade and sending supply chains spiraling further. Supply chain frictions have a lot of unintended consequences: Brexit-related supply chain issues made it hard for some Brits to get their hands on a pint of beer, while China’s punitive zero-COVID policy drove the auto industry – among others – into a full-blown crisis. We take a look at the Global Supply Chain Index from 2000-2022 along with key global economic milestones.
Episode 7: Future-proofing: How we fix broken supply chains
Listen: “Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working,” said Eurasia Group’s Christina Huguet.
On the latest episode of Living Beyond Borders, we’re talking about the moment those lights went out—as the COVID-19 pandemic took hold and disrupted shipping, manufacturing, and labor all at once—and what it will take more than two years later to turn those lights back on and create more resilient global supply chains.
This episode is moderated by Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and features David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth; and Christina Huguet, Industrial and Consumer Analyst at Eurasia Group.
Shari Friedman
Managing Director of Climate and Sustainability, Eurasia Group
David Bailin
Chief Investment Officer and Global Head of Investments, Citi Global Wealth
Christina Huguet
Industrial and Consumer Analyst, Eurasia Group
Will stagflation make a comeback?
America’s fashionistas are super excited these days about 1990s crop tops, baggy outfits, and tattoo chokers, but economists are freaking out over a specter from a different decade: the ’70s. That’s when the US economy sputtered into what's known as “stagflation.”
Stagflation, very simply explained, is the double whammy of a stagnant economy coupled with double-digit inflation. In the mid-’70s it was caused by two oil crises, which doubled the price of crude and triggered recessions in many Western countries well into the early ’80s.
Why now? Six months ago, when COVID-related supply chain disruptions first started pushing up global inflation, there was a heated debate among economists about whether stagflation was looming. The skeptics argued that prices would stop rising when the pandemic ended and things “got back to normal.”
But earlier this year came two unexpected shocks. The first was Russia's war in Ukraine, which has driven the cost of energy, food, and other commodities through the roof. The second was China's zero-COVID policy, which has snarled supply chains even more.
It’s the war, stupid. TIGER — a global index tracking the global economic recovery set up by the Brookings Institution and the Financial Times — warned in its Sunday update that stagflation might affect most economies this year as the war in Ukraine exacerbates a slowdown in the global post-pandemic recovery.
What’s more, on Tuesday the International Monetary Fund will lower its growth forecasts for 143 of the world’s economies, representing a staggering 86% of global GDP.
Barely six months ago, IMF chief Kristalina Georgieva dismissed talk of stagflation when prices were beginning to rise mainly due to pandemic-induced supply chain disruptions. Now, she says that the Russian invasion is a “massive setback for the global recovery” from COVID and admits that “for the first time in many years, inflation has become a clear and present danger.”
How big of a deal is this? Stagflation has often been described as pretty much the worst thing that can happen to an economy outside of a war, a natural disaster or, obviously, a pandemic. If GDP doesn’t grow enough for wages to keep pace with inflation, everyone feels the pinch: purchasing power declines, people lose their jobs, credit and investment dry up, and poverty increases.
Also, recessions tend to have political consequences. US President Joe Biden surely knows that his predecessor Jimmy Carter blames losing his job in part on America’s economic “malaise” at the end of his term. Wherever stagflation hits, expect incumbents to feel the heat from populist insurgents who claim to have the secret sauce for making economic woes go away (spoiler: they likely won’t).
So, should we be worried? As always, economists disagree.
On the one hand, the war and zero-COVID have thrown a wrench into a global recovery that was already limping. The longer the war drags on and the longer Xi Jinping doubles down on his policy to contain the pandemic in China, the more prices will continue to rise and the more supply chains will be impacted by Chinese lockdowns.
Xi might be able to keep China’s economy chugging along with more stimulus spending, but other countries won’t because COVID left their coffers empty. Also, the world’s economy is a lot more interconnected than it was in the ’70s, and since inflation is a global phenomenon, all nations will take a big hit.
On the other hand, it might be too early to determine whether the current economic slowdown will be enough to trigger stagflation in many parts of the world. For instance, the US economy is still doing well and unemployment remains low despite recession fears. (The traditional definition includes high unemployment, but most economists now believe economic stagnation and high inflation are enough.)
"While global inflation is now very high — above 7% in the US, the EU, and the UK — it is still forecasted to lower in the next few months," says Eurasia Group analyst Robert Habib. "For one thing, spending will cool in part because central banks will raise interests rates across the board. For another, supply chain issues will ease as cargo traffic starts to pick up."
Whatever happens, people are definitely curious about stagflation nowadays. Last month, Google searches for the term far exceeded those during the 2008 global financial crisis.
What's your take? Let us know here.