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Geopolitical shifts

The world is going through geopolitical shocks post Covid-19. Historically, conflicts have brought economic shifts, but also, economic and financial decisions have brought conflicts. For instance, the #ukraineconflict has brought economic consequences to #russia which in turn has searched for solutions by partnering with #china and pushing for #brics reform. In the case of US-China relationships, the globalization pushed a lot of manufacturing out of the US into China, thanks lo lower labour costs and an improved quality production. But as can be seen in the chart below, since 2018, and particularly after #covid, imports from China by the U.S. have fallen significantly, almost 50%. This is having an impact on China’s gdp, and on youth employment, which is creating internal conflict, but also, there are less dollars in Chinese hands, which historically have been big buyers of US treasury bonds. The pre pandemic efficiency, has been abandoned and transformed into resiliency by onshoring or near shoring manufacturing, in this case into #Mexico, which in turn, benefits from a good trade balance with the US, which supports their currency and creates employment.

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Chart source: Bank of America research

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