Global Economy & Trade 2019

Written by  //  September 3, 2019  //  Global economy, Trade & Tariffs  //  No comments

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Global Economy & Trade 2016-18

3 September
Trump’s trade war has led to a historically weak Chinese currency — and a new study shows that impact could spread globally
(Business Insider) Global currencies have become a front-and-center issue in the US-China trade war.
The yuan slid nearly 4% versus the US dollar in August, its largest monthly decline in decades.
That weakness could spread to other emerging-market currencies, according to a study by Institute of International Finance. … A new report from the Institute of International Finance took a look at the yuan’s impact beyond the US. It ultimately concluded that if it depreciates further, it could end up weighing on the currencies of other emerging-market nations.

26 August
G7 struggle to lighten darkening economic outlook
National leaders leave annual summit with few promises for global economy.
By Hans von der Burchard and David M. Herszenhorn
(Politico Eu) — There were none of the customary references to “prosperity,” “economic growth” or “mutually beneficial trade” as leaders of the world’s richest democracies closed out their annual G7 summit on Monday.
And with good reason: They can’t make any promises
French President Emmanuel Macron, German Chancellor Angela Merkel and other G7 leaders used the summit to make a strong lobbying push, aimed at stopping Trump from further disintegrating global trade flows. But by the end, they only seemed to have patched up a bit of the worst damage done by the self-appointed “tariff man” by persuading him to soften his rhetoric against China, which had seemed to reach maximum bluster when he ordered American companies to shut operations there.

23 August
Is a global recession imminent? | Brett House & Adam Taylor
Economist Brett House and trade expert Adam Taylor discuss the escalating trade tensions between the United States and China, and what it could mean for Canada.

28 June
G20 leaders at odds over trade, geopolitical issues
Japanese PM chides China over Hong Kong rule of law, while Trump criticized for ‘America first’ policies
(AP) World leaders attending a Group of 20 summit in Japan that began Friday are clashing over values that have served for decades as the foundation of their co-operation as they face calls to fend off threats to economic growth.
“A free and open economy is the basis for peace and prosperity,” Japanese Prime Minister Shinzo Abe told his counterparts in opening the two-day G20 meeting, which comes as leaders grapple with profound tensions over trade, globalization and the collapsing nuclear deal with Iran.
While groups like the G20 endeavour to forge consensus on broad policy approaches and geopolitical issues, they also are divided on an array of issues.

25 June
Trump’s Trade War With China Is Already Changing the World
Trump’s tariffs have changed global trade. Just not in the way he expected.
His tariffs are contributing to a “generational shift” in which companies make their products.
By Michael Schuman
(The Atlantic) The trade war between the United States and China has ratcheted up of late, with President Donald Trump and President Xi Jinping set to have a one-on-one meeting at the G20 Summit this week in hopes of restarting stalled trade negotiations. But whether or not or a deal is struck, the trade fracas between the two countries has already led businesses to redraw the map of global production: Instead of companies shifting manufacturing from China back to the U.S. as Trump wanted, they’re moving their assembly lines to Southeast Asia and other parts of the world. (One survey revealed that about 40 percent of companies doing business in China reported that they have relocated or are considering moving operations out of China.) It’s not just businesses that are feeling an effect. As China and the U.S. drift apart, a new pattern of global relations may be emerging, with China and Russia growing closer than at any point in recent memory.

4 June
Trump’s trade wars sent global investment tumbling – World Bank
Brexit and trade disputes push bank’s policy uncertainty index to record high, says report
(The Guardian) Donald Trump’s trade wars with China, Mexico and Europe have sent global investment tumbling, according to a World Bank report that forecasts worldwide growth this year will slip back to levels not seen since 2016.
The Washington-based lender to developing world countries said in its half-yearly global health check that spiralling political uncertainty was to blame for a slowdown in trade and a collapse in investment spending that will push down GDP growth to 2.6% this year “before inching up to 2.7% in 2020”.
The decision by the Trump administration to impose higher tariffs on Chinese imports and prolonged Brexit uncertainty were among a string of events to increase the World Bank’s policy uncertainty index to a record high
World Bank Cuts Global Outlook as Trade Tumbles to Decade Low
(Bloomberg) “There’s been a tumble in business confidence, a deepening slowdown in global trade and sluggish investment in emerging and developing economies,” World Bank President David Malpass said in a call with reporters. “Momentum remains fragile.”
The bank also warned that risks are skewed “firmly” to the downside, citing reignited trade tensions between the U.S. and China, financial turbulence in emerging markets and sharper-than-expected weakness in advanced nations, particularly Europe.

11 May
Paul Krugman: Killing the Pax Americana
Trump’s trade war is about more than economics.
… trade policy isn’t just about economics. It’s also about democracy and peace.
…the postwar trading system grew out of the vision of Cordell Hull, FDR’s Secretary of State, who saw commercial links between nations as a way to promote peace. That system, with its multilateral agreements and rules to limit unilateral action, was from the beginning a crucial piece of the Pax Americana. It was as integral to the postwar order as the I.M.F., which was supposed to provide a safety net for nations having balance of payments trouble, or for that matter NATO.
And Trump’s trade war should correspondingly be seen as part and parcel of his embrace of foreign dictators, lack of respect for our allies, and evident contempt for democracy, at home as well as abroad.
… where the Europeans are weak, Trump is malign. He’s working actively to make the world a more dangerous, less democratic place, with trade war just one manifestation of that drive. And the eventual negative consequences for America and the world will be much bigger than anything we can capture with economic modeling of the effects of tariffs.

12 April
China’s imports slump sparks fresh fears about global economy
Country has $32bn surplus in March but trade war with US is serving as brake on growth
As China and U.S. inch toward a trade deal, Canada gets a warning of potential harm
(Globe & Mail subscribers) U.S. and Chinese negotiators have, in nine rounds of talks, shaped the contours of an agreement that is expected to see Beijing lower some of the barriers that have made it home to the most hostile rules for foreign investors among any major economy monitored by the Organization for Economic Co-operation and Development.
All of China’s trading partners are likely to benefit from changes to protectionist policies, protections for intellectual property or requirements for technology transfer, said Tomas Valasek, the director of Carnegie Europe, on a recent visit to Beijing.
But in other respects, the United States is playing “a complete zero-sum game” relative to other countries, he said. Observers believe Washington is seeking roughly US$200-billion a year in additional Chinese purchases of U.S. goods, which over the six years to 2025 could amount to US$1.2-trillion
It all amounts to “purchases that would have been dispersed or divided between all of the other countries, and now won’t be,” Mr. Valasek said. On at least three different occasions, European leaders have reached out to the White House to suggest joining forces in trade talks with China, Mr. Valasek said.

21 January
IMF cuts world economic forecast for 2019, citing trade tensions
(Market Watch/AP) The International Monetary Fund has cut its forecast for world economic growth this year, citing heightened trade tensions and rising U.S. interest rates.
The IMF said Monday that it expects global growth this year of 3.5%, down from 3.7% in 2018 and from the 3.7% it had forecast for 2019 back in October.
Unveiling its forecasts at the World Economic Forum in Davos, Switzerland, the fund left its prediction for U.S. growth this year unchanged at 2.5%. But it trimmed the growth outlook for the 19 countries that use the euro currency to 1.6% from 1.8%.
“Higher trade uncertainty will further dampen investment and disrupt global supply chains,” said IMF chief economist Gita Gopinath.
Rising interest rates in the U.S. and elsewhere are also pinching emerging-market governments and companies that borrowed heavily when rates were ultra-low in the aftermath of the 2007-2009 Great Recession.

17 January
A brief history of globalization
by Peter Vanham, Media Lead, US and Industries, World Economic Forum
(WEF) Silk roads (1st century BC-5th century AD, and 13th-14th centuries AD)
People have been trading goods for almost as long as they’ve been around. But as of the 1st century BC, a remarkable phenomenon occurred. For the first time in history, luxury products from China started to appear on the other edge of the Eurasian continent – in Rome. They got there after being hauled for thousands of miles along the Silk Road. Trade had stopped being a local or regional affair and started to become global.
That is not to say globalization had started in earnest. Silk was mostly a luxury good, and so were the spices that were added to the intercontinental trade between Asia and Europe. As a percentage of the total economy, the value of these exports was tiny, and many middlemen were involved to get the goods to their destination. But global trade links were established, and for those involved, it was a goldmine.

2 January
The Trump administration is weakening the global trading system
(The Economist) The coming year is shaping up to be one of preferential trade deals, where two or a group of countries agree on their own trading rules. As well as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, which came into effect on Sunday, and an EU-Japan deal, America is aiming to strike several such accords. But do these act as stepping stones towards broader trade liberalisation? Or do they distort trade and divide the world into competing trade regions? And what will be the impact on the multilateral system overseen by the World Trade Organisation (WTO)?
Nearly 300 preferential trade deals are now recorded by the WTO. Many go beyond tariff-cutting to include rules on state-owned enterprises, intellectual property and trade in services. Having grown into an integrated trading area, the EU became an enthusiastic proponent, striking many reciprocal deals, including with Canada, Mexico and Singapore. In June it started talks with Australia.
As they proliferated, economists learnt more about their impact. One fear had been that they might divert custom from more efficient producers in third countries. But a study by Aaditya Mattoo, Alen Mulabdic and Michele Ruta of the World Bank, published in 2017, found that shallow deals do little to reduce trade with third countries, and deep ones tend to increase it. This, they think, is because rules on competition policy, subsidies and standards are hard to apply in a discriminatory way.
Though previous American administrations were sometimes frustrated with the WTO, they viewed it as the foundation of the trading system. Preferential deals were an instrument of diplomacy. TPP was intended to create a template for a trading system that might eventually include China, and perhaps give reform-minded Chinese policymakers something to aim for.
Mr Trump’s trade agenda could hardly be more different. His “America First” rhetoric, threats of tariffs on allies and of withdrawal from the WTO, and policies of blocking appointments to the WTO’s court and using tariffs as a national-security tool, are inimical to an even-handed system that all can support. Even if these policies turn out to be temporary, the uncertainty they cause may be permanent.

31 December
Canada and 5 other nations pull trigger on world’s biggest trade deal — leaving America out in the cold
Opinion: The world’s most radical trade pact has come into force across the Pacific as the U.S. sulks on the sidelines
The world’s most radical trade pact has come into force across the Pacific as the U.S. sulks on the sidelines, marking a stunning erosion in American strategic leadership.
Eleven countries are pressing ahead with the Comprehensive Agreement for Trans-Pacific Partnership (CPTPP), defying barely-disguised efforts by the Trump administration to kill the treaty.
A vanguard of Japan, Singapore, Mexico, Australia, Canada and New Zealand activated the treaty over the weekend, ripping down barriers to trade in almost all goods. It eliminates 18,000 tariffs and slashes others in stages over coming years.
The pact opens up trade in services on the basis of equal treatment. It cuts the costs of customs clearance, rules of origin and compliance to a minor friction. Once Vietnam, Malaysia, Peru, Chile and Brunei have ratified the treaty it will cover 13.5 per cent of global GDP, bigger than the EU’s post-Brexit market and a faster-growing region of the global economy.
South Korea, Thailand, Taiwan, Indonesia and Colombia have all expressed interest in joining. So has the U.K., despite being in the Atlantic. It promises to become the world’s biggest free trade zone in short order, and perhaps the nucleus of a new global order.
The White House assumed that the TPP would wither on the vine without U.S. impetus. Instead, long-standing U.S. allies across the Pacific have brushed off pressure from Washington and forged ahead regardless with what is now known as the “anti-Trump pact.”
America is the biggest loser,” says the Peterson Institute in Washington. The fall in food tariffs under the CPTPP means that U.S. farmers will be undercut by exporters from Australia, Canada, and New Zealand in the lucrative Japanese market.
The latest twist is that Chinese officials have begun to explore the possibility of joining the pact that was supposed to exclude them, prompting a wary riposte from its founders.

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