Daily Management Review

US Economy Can Be Damaged By Trump's China Trade War, Says OECD


US Economy Can Be Damaged By Trump's China Trade War, Says OECD
There can be significant damage to the US economy as well as for the rest of the world if there is an extension of the US-China trade war. This was said as a warning to the US president Donald Trump by the most influential economics thinktank of the west.
As much as 0.7 per cent could be knocked off the level of global GDP by 2021-22 is there is an intensification of the dispute between Washington and Beijing, said the Paris-based Organisation for Economic Co-operation and Development (OECD). The world economy could loose as much as $600bn because of the higher tariffs in such as scenario.
Its assessment of the global economy was reduced by the OECD primarily because of the ongoing trade war between the US and China. The thinktank said that there has already been a marked weakening of the momentum of the world economy and that the growth of the global economy would remain at a subpar rate if the trade tensions persist. The imposition of higher tariffs would result in loss for both the US and China, the OECD said.
This year, the world GDP growth will slow to 3.2% from the 3.5% in 2018, forecast the Paris-based body. Growth would pick up slightly to 3.4% in 2020. The OECD warned that there was stabilizing of the global growth at low levels which would be well below the growth rates that the global economy had seen in the last three decades.
If there is a further escalation of the trade war with import tariffs being imposed on all goods from US and China into both the countries and a consequent drop in investments, there would be a 0.8% drop in the US GDP growth than if a trade war can be avoided right now. The OECD said that there would be a drop of 1.1% in the Chinese economy in such a worst case scenario than without a trade war.
Earlier this month, the US unexpectedly increased import tariffs on $200 billion of Chinese goods imported into the US from 25% to 10% which was hit back by China by imposing tariffs on US imported goods into the country worth $60 billion.
There can be an increase in the consumer prices in the US by 0.3% if the latest increased tariffs announced by Trump earlier this month are maintained. That prediction was however not as bad as the worst case scenario depicted by the OECD.  By 2021-22, there was be a fall back of the US and Chinese GDP by between 0.2% and 0.3% on average, the OECD also worried.
In 2017, there was a drop of 5.5% in the growth in world trade flows while in the first few months of this year, that dropped to zero, said Laurence Boone, the chief economist at the OECD.  “The trade tensions have derailed global growth that we were seeing in sync in 2017. What’s happening is very worrying,” he said.

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