How Will a Trade Deal after the US Presidential Election Affect Global Trade?
11 DECEMBER 2019
From the US, policy of
no limit to prosperity and broadly shared prosperity to the era of import
tariffs imposed by US President Donald Trump on China, Brazil, and Argentina
indicate that the US is hell-bent on rattling the global economy for its
benefits. US President Donald Trump announced that a trade agreement with China
might have to wait until the US presidential election in November 2020, which
means the trade war could drag on until 2021. The US president’s quote “I have
no deadline” has dashed all hopes of a solution to the trade dispute that
has severely impacted the global economy. In the hope of a deal, investors
pumped billions of dollars in the share market, but Trump’s quote came as a
rude shock to the investor’s community across the globe. With Trump’s comments,
European share prices, US stock futures, and the Chinese Yuan currency fell,
causing jitters in the business community.
According to some
economists, Trump’s comments might be a ploy to gain an upper hand in the
negotiations and compel China to toe the US line. Reportedly, China and the US
have made progress in the trade deal, but the deal is stuck on whether existing
US tariffs will be removed and over the quantum of Chinese purchases of US
agricultural products as part of a “phase one” trade deal. The Chinese side
believes that President Trump needs an agreement before the end of the year due
to the presidential election.
Impact
of the trade war
Both developed and
developing nations are feeling the pain of the trade war. A developed economy,
such as Iceland, which is dependent on tourism, is witnessing a drastic reduction
in tourist arrival since the crisis. European countries that are open to trade
and rely on exports are feeling the heat of the trade war.
'
The German economy,
which gains maximum from exports, is on the verge of recession. Uncertainty in
the business community is prevailing across the globe. Many companies are
scaling back their investment plans, something that will have repercussions for
years to come.
Trade links between
countries have led to prosperity and a more peaceful world. Even the United
States hasn’t been immune from the impact of the trade wars. American farmers
have been hurt by Chinese retaliatory tariffs on US agricultural products,
compelling the Trump administration to shell out billions for farmers’ aid.
According to economists, businesses in China have passed on almost all tariffs’
costs to American importers. But retailers in America are absorbing at least
some of the duties, rather than passing the entire cost on to their customers.
It shows that American businesses have had less success in passing on the
values of tariffs to Chinese importers because of the types of goods being
sold. The types of specialized consumer goods, like laptops and smartphones,
that China exports to the United States are difficult to substitute, while
China can easily swap Brazilian soybeans for American ones.
On the flip side, the
trade war has resulted in gold prices going up with investors reposing faith on
safe-haven assets. The trade tensions are helping the African nations to create
a more self-reliant continent. India has emerged as a frontrunner for US
giants, such as Apple and Microsoft, to expand their bases due to growing
pressure on US companies to shift their headquarters from China. The trade war
has also offered India an opportunity to lure firms to use the country as an
exporting base.
Talking to InsideOver,
Dr SP Sharma, Chief Economist, PHD Chamber of Commerce and Industry (PHDCCI)
said that the trade war has impacted 0.8 per cent of the global economy, i.e.,
USD 700 billion, and the trade war should end at the earliest. Dr Sharma added
that the U.S. President Trump’s quote is merely an election gimmick. Elections
are around the corner in the US; in the tussle with China, Trump would not like
to do anything that would harm the US or the global economy. Other economists,
too, echoed the same opinion and added that in cases of dialogues with North
Korea and Taliban, Trump earlier had rebuked both of them but later on joined
the negotiation table. How Will a Trade Deal after the US Presidential Election Affect Global Trade?
Comments