A Jump for Joy Lifts an Otherwise Gloomy Confab on Global Growth
Trade confrontations are sucking the air out of the global economy.
That’s the mood among officials gathering in Washington through the weekend for the International Monetary Fund and World Bank’s annual meetings.
While a potential truce between the U.S. and China and better news on Brexit has lifted some spirits — new IMF Chief Kristalina Georgieva said she jumped after hearing the news of a Brexit deal — few are convinced the worst is over.
“I don’t think uncertainty is completely gone,” Bank of Japan Governor Haruhiko Kuroda told reporters. “The scope of the U.S.-China trade and economic conflicts is very large, and it remains to be seen how the situation will develop down the road.”
Other skirmishes show no signs of abating:
- The U.S. on Friday is putting tariffs on $7.5 billion worth of European Union products, a move allowed by the World Trade Organization but one that avoids the negotiated settlement that Brussels has sought for months.
- Japan and South Korea are locked in a feud involving chip-making material that threatens to disrupt the global tech supply chain and hobble the two trading powerhouses already feeling the pain from China’s slowdown.
- The Trump administration faces a mid-November deadline to decide whether to justify (or further delay) tariffs on imports of autos and parts for national-security reasons, a potential game-changing escalation with longtime allies in Asia and Europe.
- As the disputes abound, the wheels of justice are about to grind to a halt. The World Trade Organization’s appellate body, the panel that settles disagreements, may lose the capacity to issue new rulings in December, sending global commerce back to what one official has called the “law of the jungle.”
With economic policy makers convening in the U.S. capital, Georgieva said “the focus must be on reversing tariff increases and finding lasting solutions to trade disputes, including by removing domestic distortions and strengthening the multilateral trading system.”
Her warning came two days after the IMF projected world trade volume growth will crater this year to 1.1% from 3.6% in 2018, though it sees some recovery next year.
So if protectionist policies continue to prevail, Georgieva’s jumping for joy might be a short hop. It’s harder to maintain lift in thin air.
“Global trade is like the oxygen for the global economy,” South African Reserve Bank Governor Lesetja Kganyago said. “If global trade is not taking place, global growth is at risk.”
Charting the Trade War
A relatively unsung factor behind President Donald Trump’s election in 2016 was a near-recession that few noticed at the time. It might have tipped key swing states in Trump’s favor. The bad news for Trump in 2020 is that those same states — Michigan, Pennsylvania and the aforementioned Wisconsin — are once again under the economic weather because of the trade war, according to Bloomberg Opinion’s Karl Smith.
Today’s Must Reads
- Tariffs in Tinseltown | Trump’s trade wars have upset the calculus for some of the biggest decisions shaping the world economy. And for some lunch menus in Los Angeles.
- China’s slowdown | The world’s second-largest economy slowed in the third quarter on weaker investment, providing little upside for global growth that’s the weakest in a decade.
- Philadelphia story | One in six companies in the Philadelphia region of the U.S. plans to reduce capital spending next year because of trade policies, a Federal Reserve survey showed.
- Replacing Nafta | The White House and House Democrats are increasingly upbeat that the stalled U.S.-Mexico-Canada trade agreement can be amended and approved in Congress.
- Getting the shaft | The clearest sign yet that American coal industry faces widespread job cuts: The amount of coal being produced per U.S. miner is at the lowest level in eight years.
- Asia’s week ahead | South Korea’s third-quarter GDP and Japan’s trade balance are among the key events.
- Elevated risks | The euro area’s fragile recovery is being blown off course by headwinds from abroad.
- Oct. 18: U.S. puts WTO-approved tariffs on certain European goods
- Oct. 18-20: IMF’s annual meetings in Washington
- Oct. 21: Japan and South Korea trade data
- Oct. 25: CPB releases Global Trade Monitor
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