Daily Management Review

Economies Around The World Feeling The Pinch Of Trump’s Trade War


Economies Around The World Feeling The Pinch Of Trump’s Trade War
It is not only China that is feeling the pinch of its trade war with the United States but and the collateral damage is being felt in many other parts of the world.
At the International Monetary Fund and World Bank fall meetings in Washington this week, grim tales of suffering economies were dictated by central bank governors and finance ministers. The huge shift of the US policies sine the 1940s, when the IMF was co-founded by it, was also noted by some.
World Bank President David Malpass told attendees at a session this week said that at that time, “the world economy had been hammered for over a decade by high tariff barriers, depression and war,” prompting then-U.S. Treasury Secretary Henry Morgenthau to champion a global economic system.
“First, there’s no limit to prosperity. Second, broadly shared prosperity benefits everyone” was the US message back then, Malpass said.
The unintended negative impacts of the trade wars were becoming clear as the gathering of 189 member-nations of the IMF came to an end. “Everybody loses,” said IMF Managing Director Kristalina Georgieva.
15 months ago, a bitter trade was initiated by the US, the largest importer of the world, with China. Traditional trade relationships with many allies is also being attempted to be renegotiated, and sometimes upended by the US President Donald Trump.
The result of the policy is a slowdown in global growth for 2019 to 3.0 per cent, the slowest rate of growth since the 2008 global financial crisis, said the IMF in a forecast earlier this week.
However the collateral damage of the trade war is not spread equally. For the US, kits   massive domestic consumer spending base has helped its economy to remain the least exposed ot the trade war among the 20 largest economies of the world that is seeing a drop in exports.
The European Union’s Economic and Financial Affairs Commissioner Pierre Moscovici said that the European countries, which “rely on exports and are open to trade,” are feeling the hit of the trade war and the slow down of global trade particularly hard.
German Finance Minister Olaf Scholz told reporters, there is massive uncertainty in German business and it is impacting the economy, the largest economy of Europe and one of the major economies of that world, 40 per cent of which is dependent on exports.
The forecast for exports for Germany for 2019 was trimmed to just 0.5 per cent from 1.5 per cent recently by the German trade group BGA. Many companies are reducing their planned investments which will have long term implications on the economy. 
Global economic growth is being dampened by the trade dispute between the European Union and the US as well as the uncertainty of the exit of the United Kingdom from the EU, Scholz said.
“The most important problem remains those factors that we cannot measure – specifically the reluctance to invest,” Scholz said.
European economies that do not depend on exports, such as Iceland, are also facing the pinch. Iceland was the first of the developed economies that was forced to seek financial help from the IMF since the 2008 global financial crisis. The country has however been able to reorganize its economy since then in what is described to be a miraculous recovery. That recovery is however under threat.
“We have become dependent on tourism,” explained Ásgeir Jónsson, the governor of Iceland’s central bank. However since the trade war started, there has been a steep fall in foreign arrivals with a 15.6 per cent dip this summer compared to a year ago.
Assessment on its factory output for October was downgraded by Japan’s Cabinet Office, which helps coordinate government policy on Friday. This was primarily because of a slowdown in demand for Japanese cars in the US despite the country’s production increasing steadily until the spring.
A push among African nations to create a more self-reliant continent is being pushed by the trade tensions.  “We must take it upon ourselves to grow trade among ourselves,” said Ukur Yatani Kanacho, Kenya’s acting cabinet secretary for treasury.
Pressure of the trade war is also being felt by other emerging markets.
“Ukrainian exporters faced worsened conditions in global commodity markets,” which drove down steel prices, said Kateryna Rozhkova, the deputy governor of the country’s central bank. She added that “the intensification of geopolitical conflicts led to rising oil and natural gas prices in the world” has made matters worse.

Trade tensions have also affected the economies of the Gulf region, said Bahrain’s Finance Minister Sheikh Salman bin Khalifa Al Khalifa,, which has resulted in slowdown in investment even though geopolitical concerns – such as with Iran, were other dampers.
“Trade tensions create uncertainty and nobody is insulated from uncertainty,” he told Reuters.