Protectionist policies of Trump main reason behind global ‘stagnation’ according to top economists

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The trade war that has surfaced between China and President Trump and the disengagement that is increasing on the world stage for which the global economic growth is undermined and threatened and this came from IMF’s outgoing head and the Bank of England’s former head.

Economic minds who are globally prominent are raising concerns about the financial security globally, as alarms have been raised because of the trade war between China and President Donald Trump and the policies which are very much protectionist are dragging the growth and in creating this economy are hurt all across the world.

According to Nicolas Veron from the Peterson Institute for International economics who is a part of the Brussels think tank in Bruegel and is a senior fellow member said that the escalation between the USA and China is the biggest story at this moment and no resolution is visible at this moment.

At the International Monetary Fund meeting that was held recently in Washington D.C., the chief concern that emerged was the trade tensions with the World Economic Outlook of the organization showed that the practices of trade have already caused a deceleration in growth.

Significant damage was done to the global and US economies because of the trade war by President Trump according to Moody’s Analytics chief economist Mark Zandi. According to Zandi, there has point off in half a percentage of the GDP growth globally which has been shaved off by the trade war and the cost of it in jobs amounts to US 375,000.

This year a 3 percent growth rate is forecasted by IMF globally and there has been a point drop of 0.3 percentage according to the last report which came out in April and it is the lowest that has been recorded since the time of the last recession. According to reports, Gita Gopinath, who is the chief economist of IMF listed that there has been an increase in the amount of trade protectionism and the uncertainty is elevated concerning the trade and other issues geopolitically which are the first two obstacles to a more robust economic expansion.

According to Gopinath, there has been a synchronized slowdown that is undergoing in the global economy even though an accommodative environment of monetary policy exists.

According to Mervyn King who is the former governor of Bank of England, as the Central Bank is presided over by him after and during the recession and financial crisis in 2008 and 2009, said at the meeting in IMF that the trade war between China and the United States and the disengagement that has increased on the world stage threatens global economic growth and undermines it and raise two primary risks. According to him, there is a great stagnation in the world. He came with a warning that the current trajectories set by fiscal and monetary policymakers have absent changes all around the world which is one more instance for the destabilization and the central banks will be left with only a few tools around the world to fight back.

A 60 minutes interview that was aired on CBS on Sunday, the former director of IMF and the incoming Chief of European Central Bank, Christine Lagarde elaborated on the fact that on how the trade protectionism by White House held back the investment and spending.

In terms of trade certainty and predictability, President Trump holds the biggest key to it. On is unable to adjust to the unknown and the unknown has been hurting according to her. She also added that this lack of predictability stops companies from contributing and spending on the expansion of the economy. According to her, they sit on their own money.

Zandi in concurrence to the assessment made by Lagarde said that the global trade has been brought to a standstill because of the higher tariffs and the confidence in the business and investment is undermined by the uncertainty that was created around it. If threats are continuously raised by President Trump regarding the rise in tariffs on the import of vehicles in November that are coming to the US or on the imports of Chinese goods in December then the global economies and the US are bound to suffer some downturns in the next year.

Many uncertainties have been swirling around President Trump and according to trade experts, the elections that are slated to happen next year could be the central point for the willingness of the business community to invest. According to Veron, the election in 2020 is the major issue all over and has been the talking point in every discussion. He further added that a win for Trump would mean that the trade war will not end and will be continued mercilessly.

The industries which produce goods both abroad and in the US have been suffering a lot according to Zandi. The industries of transportation, agriculture, and manufacturing which account for one-fifth of the output approximately are suffering from recession according to him.

It has also been noted by the IMF that the impact of the trade war and its wide-ranging nature has its impact on the output of production and manufacturing. According to Gopinath, a feature that is notable in the 2019 slow growth is a result of the sharp and broad-based slowdown geographically in the global and manufacturing trade. There has been prolonged uncertainty and higher tariffs that have surrounded the policies of trade and has dented the demand and investment for capital goods.

According to Lagarde, if a resolution is failed to reach between the US and China and there is an escalation in the trade war throughout the world the ripple effects can be felt to a greater extent which is even more than what is happening now. She predicts that the global economy will certainly have a bigger haircut for this reason.


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