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How the US-China Trade War is Impacting the Global Economy

July 25, 2019

 

Ever since US investigations into Chinese trade policies in 2017 led to tariffs on Chinese goods, there has been a continual standoff between the two largest global economies. With over 250 billion dollars worth of tariffs placed on Chinese goods and a reciprocating 110 billion dollars on American goods in 2018, the effects of the ongoing trade war are felt internationally. There has been a drastic adverse effect on the global economy that without remedy, could halt and even reverse global economic growth.

Tuesday morning the International Monetary Fund (IMF) revised its prediction for global economic growth in 2019, showing a 0.1% decrease from their previous forecast in April and a notable 0.3% decrease from the beginning of the year. While alluding to the intensifying trade war between the US and China, the IMF claimed that the decrease in global economic growth is in part due to, “Weak trade prospects—to an extent reflecting trade tensions—in turn create headwinds for investment.” Furthermore, Morgan Stanley estimates if the trade war continues to escalate, there could be a possible 0.81 percentage point drop in global GDP. 

On Wednesday, the White House released a statement claiming that US trade representative Robert Lighthizer and US Treasury secretary Steven Mnuchin will meet with Vice Premier Liu He in China next week in an attempt to further negations and hopefully reach an agreement with the Chinese government. With President Trump easing up on the US business ban on telecom giant Huaweii and a renewed effort by President Xi Jinping to revitalize Chinese importation of US agricultural goods, de-escalation of the harmful trade war might be able to pivot from a long shot to a reality and allow the global economy to resume steady growth.

Keith Knutsson of Integrale Advisors commented that, “For the global economy to exhibit continual growth, tariffs must decrease on behalf of both the United States and China. The two global economic powerhouses must cooperate to create a more economically stable world.”

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