Two major surprises this year (for many forecasters), have been the weakness of China’s recovery, and the strength of the US economy and stockmarket. The two largest economies both have structural debt challenges, but different prospects for prices. European inflation remains inseparably linked to the Ukraine war, and the accompanying EU spending largesse. As a result, inflation around the world isn't happening in stride.

The expectation is that US and European interest rates will soon peak, but we suggest that if this is true, inflation will become embedded. In contrast, Chinese leaders appear reluctant to use monetary policy aggressively to stop deflation from taking hold. A key outcome is that China’s exporters could aggressively start to use the weak Yuan to gain global market share across manufacturing value chains. This could, in turn, start another round of tariff ‘wars’.