Here are some critical issues to watch around the globe over the coming month:

North America

At the start of the month, the United States (US) announced sanctions on Iran’s foreign minister, Mohammad Javad Zarif, escalating tensions between the two countries. Another point of tension this month was the US’ failed attempt to block the release of Iranian tanker that had been seized by British authorities. Despite the circumstances, US President Donald Trump is open to meeting with Iranian President Hassan Rouhani, but Rouhani will only participate in talks if the US lifts sanctions against Iran.

Trade war tensions escalated at the beginning of August as US President Donald Trump announced new tariffs on an additional $300 billion worth of Chinese goods in retaliation of Chinese tariffs on US products announced just a couple of days earlier. Following that escalation, China allowed their currency to weaken, and stopped making new purchases of American farm goods. The trade escalation rattled world markets and sparked fear of a currency war. The most recent round of US tariffs on Chinese goods took effect September 1^st . The US-China trade war has become a dangerous threat to the stability of global markets.

After huge protests led to the resignation of Ricardo Rosselló, Pedro R. Pierlusi, Rosselló’s handpicked successor, was sworn in as Puerto Rico’s new governor. Just days later, Pierlusi stepped down after the Supreme Court ruled his governorship unconstitutional due to the fact he had not been confirmed by both chambers of the legislature. Puerto Rico’s Justice Secretary Wanda Vázquez Garced has been sworn in as the island’s new governor.

The yield curve between two-year and ten-year Treasury yields inverted this month for the first time since 2007, indicating growing unease in the fixed income market and sending signals of economic stagnation. This is arguably a more powerful indicator of economic slowdown than the curve that compares three-month yields against ten-year yields, which had already inverted.

The Congressional Budget Office (CBO) announced their latest deficit projections. They have raised their estimate of the projected federal budget deficit to $960 billion for the 2019 fiscal year. For the 2020 fiscal year, the CBO projects the deficit will reach $1 trillion, implying that the US debt will increase by over $12 trillion in the next decade!

Europe

The Italian government collapsed a few weeks ago when Prime Minister Giuseppe Conte announced his resignation in the face of a confidence vote initiated by Deputy Prime Minister Matteo Salvini. Salvini has pushed for new elections as his right-wing League party has gained in popularity, and he desires to become Prime Minister. However, just last week Italian President Sergio Matarella, approved the return of Giuseppe Conte as prime minister to lead a new coalition government with the center-left Democrats and antiestablishment Five Star Movement (Salvini’s former coalition partner), sidelining Salvini and his party. Italy now faces the challenge of creating a new government between the Democrats and Five Star which have opposed each other in the past.

Leaders of the G7 nations met in Biarritz, France and discussed current global challenges. Among the topics discussed were the de-escalation of tensions between the US and Iran, the US-China trade war, and an initiative to fight fires in the Amazon.

The Queen of England approved Prime Minister Boris Johnson’s request to suspend parliament. Johnson’s move is part of his strategy to prevent members of parliament’s efforts to stop a no-deal Brexit. He has insisted that the UK will leave the European Union on October 31st with or without a deal. In response to the parliament suspension and heightened no-deal Brexit fears, the sterling pound has dropped against the euro.

According to government data, German industrial production saw its largest annual decline in nine years. The escalating trade war between the US and China has taken its toll on German exports as factory output has become increasingly reliant on exports to Asia. The decline has brought further uncertainty to German markets and has sparked fears of a recession.

Asia-Pacific

Both Japan and South Korea have removed each other from their preferential trade lists, escalating the trade dispute between them. This conflict could have major repercussions for the global tech industry, as Japan is a major producer of important chemicals in tech products and South Korean companies produce more than half of the world’s semiconductors and ninety percent of smartphone screens. The trade dispute also has implications for security cooperation in the Pacific between Japan, South Korea, and the US.

Clashes between protesters and police in Hong Kong have intensified. Protests have been raging for over two months now as Hong Kong citizens are demanding greater democracy. This past month, Hong Kong’s international airport was shut down for multiple days by demonstrations. China’s mainland government in Beijing has become increasingly heated on the issue. Most recently, Chinese military forces held exercises near Hong Kong and sent troops to its garrison in Hong Kong.

North Korea has rejected talks with South Korea after South Korean President Moon Jae-in announced he would pursue unification of the peninsula. To heighten tensions even more, North Korea fired more missiles in addition to two they fired after the US and South Korea continued joint military exercises off the peninsula.

The Indian government issued a presidential order that revoked the special status of the disputed Kashmir region, weakening the Muslim-majority state’s independence and heightening tensions with Pakistan. Pakistan’s foreign minister condemned the move, stating that it violates a UN resolution on the Kashmir conflict. Thousands of Indian troops now occupy the region and Kashmir citizens have been cut off from internet access and communication with the rest of the world. This territory has been disputed between Pakistan and India for decades.

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